spb/ultra-sharp-agent-skills Public

1<!--2Author: Simon-Pierre Boucher3Contact: contact@spboucher.ai4-->56# Reference — US Personal Tax Optimization78## Contents9- Traditional vs Roth decision table10- Worked example: traditional vs Roth at two rates11- Worked example: Roth conversion in a gap year12- Worked example: bunching deductions13- Worked example: tax-loss harvesting14- Common credits worth checking (2026)15- Estimated-tax safe harbor16- Contribution mechanics and deadlines17- Gotchas1819## Traditional vs Roth decision table2021| Situation (tax year 2026) | Pick | Why |22|---|---|---|23| Marginal rate now > expected retirement rate | Traditional | Deduct at the high rate, withdraw at the low rate |24| Marginal rate now < expected retirement rate | Roth | Pay the low rate now, withdraw tax-free |25| Rates roughly equal | Roth (slight edge) | Tax-free growth hedges future rate increases; no RMDs on Roth IRA |26| Low-income year (sabbatical, grad school, early retirement) | Roth conversions | Fill the 10–12% brackets with converted dollars |27| Needs the deduction to qualify for credits/subsidies | Traditional | AGI reduction can unlock saver's credit, ACA subsidies |2829## Worked example: traditional vs Roth at two rates3031$10,000 of salary directed to a 401(k), invested 25 years at 7%/yr (≈5.43× growth).3233**Case A — 32% now, 22% in retirement:**34- Traditional: $10,000 grows to $54,300; taxed 22% at withdrawal → **$42,354 net**35- Roth: $6,800 after tax grows to $36,924 tax-free → **$36,924 net**36- Traditional wins by ~$5,400 per $10k contributed.3738**Case B — 12% now, 22% in retirement:**39- Traditional: $54,300 × 0.78 → **$42,354 net**40- Roth: $8,800 after tax grows to $47,784 tax-free → **$47,784 net**41- Roth wins by ~$5,400. The comparison is symmetric: only the rate differential matters (plus RMD/flexibility considerations).4243## Worked example: Roth conversion in a gap year4445Single filer takes an unpaid sabbatical in 2026; only income is $15,000 of freelance work.46471. Standard deduction $16,100 wipes out ordinary income — taxable income ≈ $0.482. Convert traditional IRA dollars to Roth up to the top of the 12% bracket. Roughly: $16,100 (deduction) + 12%-bracket ceiling − $15,000 existing income of conversion headroom taxed at only 10–12%.493. Those dollars would have been taxed at 24%+ in a working year — each $10,000 converted saves ≈ $1,200+ in lifetime tax.504. Caveats: conversion income can affect ACA premium subsidies (a cliff-like phase-out — model it first), and conversions cannot be undone (recharacterization of conversions was eliminated).5152## Worked example: bunching deductions5354Married couple, tax year 2026, standard deduction $32,200. Annual itemizables: $10,000 state/local tax (capped), $8,000 mortgage interest, $12,000 charity = $30,000 — below the standard deduction every year, so charity yields zero tax benefit.5556**Bunched:** give $24,000 to a donor-advised fund in year 1, $0 in year 2.57- Year 1 itemized: $10,000 + $8,000 + $24,000 = $42,000 → $9,800 above standard58- Year 2: standard $32,20059- Two-year deductions: $74,200 vs $64,400 unbunched → **$9,800 more deducted**; at 24% ≈ **$2,352 saved** for the same giving.6061## Worked example: tax-loss harvesting6263Holding shows a $15,000 loss in November.641. Sell; buy a similar-but-not-substantially-identical fund the same day (S&P 500 → total market) to stay invested.652. Offset $15,000 of realized gains; if gains < losses, deduct up to $3,000 against ordinary income and carry the rest forward indefinitely.663. At 24% + state, the $3,000 ordinary offset alone ≈ $720+ this year.674. Check every account (both spouses, IRAs, DRIPs) for purchases of the sold security within ±30 days — any match wash-sales that portion of the loss.6869## Common credits worth checking (2026)7071Credits reduce tax dollar-for-dollar; check these before optimizing deductions. Verify amounts and phase-outs on irs.gov — they move yearly.7273| Credit | Who typically qualifies | Notes |74|---|---|---|75| Child Tax Credit | Parents of children under 17 | Partially refundable; income phase-out |76| Child & Dependent Care | Working parents paying for care | Percentage of qualifying expenses |77| Saver's Credit | Low/moderate income + retirement contributions | Stacks ON TOP of the deduction — tiered by AGI, cliff edges |78| American Opportunity / Lifetime Learning | Tuition payers | AOTC partially refundable, 4-year limit; LLC unlimited years |79| Energy credits (home efficiency, clean vehicle) | Qualifying purchases | Verify current-law status before promising anything |80| Foreign Tax Credit | Foreign investment income / expats | Form 1116; avoids double taxation |8182## Estimated-tax safe harbor8384Freelancers and investors avoid underpayment penalties by paying, through withholding + quarterly estimates, the smaller of:85- 90% of the current year's tax, or86- 100% of last year's tax (110% if prior-year AGI > $150,000).8788Quarterly due dates: Apr 15, Jun 15, Sep 15, Jan 15. A December W-2 withholding bump counts as paid evenly through the year — the cleanest late-year fix for an estimate shortfall.8990## Contribution mechanics and deadlines9192| Account | 2026 limit | Deadline for tax year 2026 | Notes |93|---|---|---|---|94| 401(k) employee deferral | $24,500 | Dec 31, 2026 (payroll) | Catch-up 50+: +$8,000; ages 60–63: +$11,250 |95| IRA (traditional/Roth) | $7,500 | April filing deadline 2027 | Catch-up 50+: +$1,100; Roth has income phase-outs — check irs.gov |96| HSA | $4,400 / $8,750 | April filing deadline 2027 | Requires HDHP coverage; 55+ catch-up +$1,000 |97| Harvesting / gain realization | — | Dec 31, 2026 (trade date) | Settlement date does not matter for US equities |9899Traditional-IRA deductibility phases out when covered by a workplace plan — verify the current phase-out bands on irs.gov before recommending.100101## Gotchas102103- **Wash sale across accounts:** an IRA repurchase of the harvested security permanently destroys the loss (no basis adjustment). Automatic dividend reinvestment is the classic accidental trigger.104- **"Substantially identical":** same-index ETFs from different providers are risky; different-index funds (S&P 500 → total market) are the accepted swap.105- **Roth income limits:** direct Roth IRA contributions phase out at high AGI; an ineligible contribution accrues a 6% excise per year until fixed.106- **Backdoor Roth pro-rata trap:** existing pre-tax IRA balances make the conversion mostly taxable — the pro-rata rule looks at all IRAs on Dec 31.107- **Bracket myths:** crossing a bracket only taxes the marginal dollars — never advise refusing income to "stay in a lower bracket"; but do watch cliff-based credits (ACA subsidies pre-2026 rules, saver's credit tiers) where $1 can cost hundreds.108- **HSA state nonconformity:** CA and NJ tax HSA earnings — the triple advantage is federal.109- **Short-term vs long-term lot selection:** specify lots (SpecID) when selling; default FIFO can realize short-term gains unnecessarily.110