--- title: Sample Tax Strategy Report - Renew Wealth Management description: An interactive sample financial plan from Renew Wealth Management showing retirement, tax, investment and estate analysis for a hypothetical household. author: Super User --- Interactive # Sample Tax Strategy Report Independent RIA Tax strategy report · tax year 2024 ## Amanda & Pre-Retiree Sample A CPA's read of your return, and what we would do differently next year. We found $45,341 of unused 22% bracket, a Medicare surcharge you can avoid with one payroll change, and more than $15,000 a year riding on which state you call home once Roth conversions begin. Prepared by **James M. Simon, CPA, CFP®** Filing status **Married filing jointly** Residence **Alexandria, Virginia** Dependents **1 (Kelly, 13)** 22% **Marginal rate**On the next dollar of ordinary income 14.3% **Average rate**Total federal tax over AGI Total income $229,670 Wages, business, investments, conversion Adjusted gross income $226,706 After half of self-employment tax Taxable income $189,709 Standard deduction plus $7,797 QBI Total federal tax $32,489 Income tax $29,462, SE tax $5,927, credits $2,900 2025 safe harbor $35,738 110% of 2024 tax avoids penalties Qualified income $34,000 $11,500 dividends, $22,500 long-term gains, taxed at 15% 22% bracket room $45,341 Ordinary income before the 24% bracket Virginia tax $11,698 5.75% top rate, no capital gains preference Hypothetical household built from the Renew sample tax return, updated to 2024 law. Hover or tap any chart for detail; drag any slider to test a strategy. 1040U.S. Individual Income Tax ReturnDepartment of the Treasury · Internal Revenue Service · Hypothetical illustration, not a filed return2024 Taxpayer and spousePre-Retiree Sample & Amanda Sample Alexandria, VA 22314 Filing status SingleMarried filing jointlyMarried filing separatelyHead of household DependentsKelly Sample · daughter · child tax credit Income 1aWages, salaries, tips (Form W-2)124,220 2bTaxable interest Schedule B1,250 3aQualified dividends included in 3b11,500 3bOrdinary dividends Schedule B15,000 4aIRA distributions $25,000 Roth conversion25,000 4bTaxable amount after $9,250 basis, Form 860615,750 7Capital gain or loss Schedule D31,500 8Business income Schedule C, Paula's Palate41,950 9Total income229,670 10Adjustments deductible half of self-employment tax(2,964) 11Adjusted gross income226,706 Deductions and taxable income 12Standard deduction married filing jointly(29,200) 13Qualified business income deduction 20% of net Schedule C after SE adjustment(7,797) 15Taxable income189,709 Tax and credits 16Tax $24,362 on ordinary income, $5,100 on qualified income at 15%29,462 19Child tax credit and other credits(2,900) 23Self-employment tax Schedule SE5,927 24Total tax32,489 Payments 25Federal income tax withheld(22,400) 26Estimated tax payments(8,000) 37Amount you owe2,089 Preparer: James M. Simon, CPA, CFP® · Renew Wealth ManagementIllustrative only ### Where the income came from $229,670 across four sources ### How each dollar was taxed Not all income is equal. Qualified income pays 15%; business income pays income tax plus 15.3% self-employment tax. Stacking order matters: ordinary income fills the brackets first, then qualified dividends and long-term gains sit on top at their own rates. ### Schedules | Schedule | Detail | Amount | | --- | --- | --- | | B · Interest | Bank of America $250 · Ally $500 · Schwab $500 | $1,250 | | B · Dividends | Vanguard $5,000 · Schwab $10,000 (of which $11,500 qualified) | $15,000 | | C · Business | Paula's Palate, net profit, no vehicle expense claimed | $41,950 | | D · Short-term | Gains held under one year, taxed as ordinary income | $9,000 | | D · Long-term | $7,500 gains plus $15,000 fund capital gain distributions | $22,500 | | 8606 · Conversion | $25,000 converted, $9,250 after-tax basis recovered | $15,750 | ### Roth conversion simulator Add ordinary income on top of the 2024 return and watch the cost Additional Roth conversion$0 Added federal tax $0 Added Virginia tax $0 All-in rate on conversion — Top bracket reached 22% Ordinary incomeQualified income (15%)Added conversion Nothing added yet. The 22% bracket has $45,341 of room. ### Tax owed in each bracket 2024 return as filed, married filing jointly ### Marginal rate by income level What the next dollar costs as ordinary income rises, federal plus Virginia, including the credit phaseout and NIIT cliff The dot marks where the household sits today. The step at $250K is the 3.8% net investment income tax on $47,750 of investment income; the bump near $400K is the child tax credit phaseout. ### Benefits and surcharges by threshold 2024 married filing jointly limits ### Distance to the next cliff Income room before each threshold is crossed $23,294 **Net investment income tax.** AGI is within 10% of the $250,000 line. Every dollar of capital gain realized above it costs 3.8% more. Harvest gains below the line, or in a year with lower business income. $3,294 **Roth IRA contributions.** Phaseout begins at $230,000. Amanda's business income is compensation, so both spouses can still contribute $7,000 each for 2024 if AGI stays under the line. $20,706 **Medicare surcharge.** This year's MAGI sets 2026 premiums. Getting under $206,000 saves the household $1,987 a year in Part B and D surcharges. Details below. Modified AGI on the 2024 return$226,706 Monthly, per person +$82.80 Annual, both spouses $1,987 Drop to base tier Cut $20,706 ### Annual surcharge by tier Part B plus Part D, for a couple, 2024 schedule Neither spouse is on Medicare yet, so this is a preview of the mechanics. The tiers are a reason to finish Roth conversions before age 63, when the two-year lookback starts to bite, and to manage income every year after. Fix for 2024 $23,000 401(k) New MAGI $203,706 Surcharge avoided $1,987 / yr ### Virginia tax walk From federal AGI to the state bill | Federal adjusted gross income | $226,706 | | --- | --- | | Virginia subtractions (none this year) | $0 | | Virginia standard deduction, joint | ($16,000) | | Personal exemptions, 3 × $930 | ($2,790) | | Virginia taxable income | $207,916 | | 2% on first $3,000 | $60 | | 3% on $3,000 to $5,000 | $60 | | 5% on $5,000 to $17,000 | $600 | | 5.75% on $190,916 above $17,000 | $10,978 | | Virginia income tax | $11,698 | Effective state rate 5.2% Marginal state rate 5.75% Combined marginal 27.75% ### What Virginia taxes that the IRS treats gently Virginia tax on each income type at 5.75% The $22,500 of long-term gains cost 15% federally but a full 5.75% in Richmond. Social Security, when it starts, will be exempt. ### Virginia planning notes 529 contributions Deductible up to $4,000 per account per year with unlimited carryforward. Kelly's $8,000 annual funding should run through two Virginia529 accounts to deduct all of it, worth $460 a year. Social Security Fully exempt from Virginia tax regardless of income. Virginia also allows an age deduction of up to $12,000 per person at 65, subject to an income phaseout. Deduction type must match If you take the federal standard deduction you must take Virginia's. In a year when itemizing is close federally, run both ways: itemizing on both returns can win because Virginia's standard deduction is small. Long-term care premiums Deductible on the Virginia return even when using the standard deduction, if not already deducted elsewhere. Pass-through entity tax election If Paula's Palate were an S corporation or partnership, the business could pay Virginia tax at the entity level and deduct it federally, sidestepping the $10,000 SALT cap. At the current profit level the benefit is roughly $500 and does not justify the entity cost yet. ### Virginia vs. Tennessee Annual household tax burden on the 2024 numbers, with the planned conversion added State income taxProperty taxSales tax Planned annual Roth conversion$50,000 Virginia, all in $0 Tennessee, all in $0 Annual difference $0 ### Twenty years of the difference, invested Cumulative state tax saved, 2.5% inflation, growing at 6% in the portfolio After 20 years $0 Conversion tax saved $0 A $1 million IRA converted over ten years from Virginia costs $57,500 in state tax alone. From Tennessee it costs nothing. ### What it takes to change domicile Virginia audits departures. Intent has to be proven, not declared. *✓*Spend more than 183 days in the new state, and keep a day-count log *✓*Driver's license, voter registration, vehicle titles and homestead exemption in the new state *✓*Sell or rent out the Alexandria home; a kept Virginia residence is the first thing an auditor asks about *✓*Move doctors, advisors, safe deposit box, church and club memberships *✓*File a part-year Virginia 760PY for the move year, then nothing *!*Virginia-source income (rental property, a Virginia business, wages for days worked in Virginia) stays taxable to Virginia as a nonresident *!*Time the Roth conversions for after the move date, not before; the state of residence on the conversion date gets the tax ### Beyond the tax bill The honest comparison a spreadsheet misses | | Virginia | Texas | Tennessee | Florida | | --- | --- | --- | --- | --- | | Income tax | 2% to 5.75% | None | None | None | | Capital gains | 5.75% | None | None | None | | Social Security | Exempt | Exempt | Exempt | Exempt | | Property tax, typical | ~1.1% | ~1.9% | ~0.6% | ~0.9% | | Combined sales tax | ~6.0% | ~8.2% | ~9.5% | ~7.0% | | Estate or inheritance tax | None | None | None | None | | Federal retiree and military ties | Strongest | Strong | Moderate | Strong | | Homestead protection | Limited | Unlimited | Limited | Unlimited | Property and sales tax rates are statewide approximations for a comparable home and household spending. Local rates vary widely; we model the specific county before any decision. ### Taxable income by year, managed vs. unmanaged Managed: Solo 401(k) deferrals reduce income, conversions refill the 22% bracket Base taxable income, managedRoth conversionTop of 22% bracket (line) ### The five-year scorecard 2025 through 2029, in today's dollars | Year | Solo 401(k) | Conversion | Taxable income | Federal tax | | --- | --- | --- | --- | --- | Converted to Roth $0 Sheltered in 401(k) $0 Never taxed at 24%+ 100% Every converted dollar is taxed at 22% federal now instead of 24% or more in retirement when required distributions stack on Social Security. On $250,000 converted, that is a floor of $5,000 saved before growth, and the growth itself is never taxed. 1 #### Open a Solo 401(k) for Paula's Palate Amanda can defer $23,000 as the employee plus about $7,800 as the employer on $41,950 of profit. That alone pulls AGI under the Medicare and Roth IRA thresholds. Saves about $8,500 of federal and state tax, and $1,987 a year of future Medicare surcharges 2 #### Convert $45,000 more to Roth before year end The 22% bracket has $45,341 of unused room once the qualified income is stacked correctly. Pay the roughly $13,300 of tax from the brokerage account. Moves $45,000 out of future 24%+ territory for good 3 #### Stop paying 22% on short-term gains $9,000 of short-term gains cost $1,980 federally plus $518 in Virginia. Hold positions past one year or harvest offsetting losses in December. Up to $1,500 a year at current activity 4 #### Fix the estimates to the safe harbor The return showed a $2,089 balance due. Set 2025 withholding and estimates to $35,738, which is 110% of this year's tax, so penalties cannot apply no matter how large the conversions get. Eliminates underpayment penalties on any conversion size 5 #### Claim the vehicle and run 529 gifts through Virginia Schedule C shows no vehicle expense; a food business almost always has one. Split Kelly's $8,000 of 529 funding across two Virginia529 accounts to deduct all of it. Roughly $1,100 a year combined 6 #### Keep Form 8606 current The $9,250 of basis recovered this year came from tracked after-tax contributions. Lose the form and the IRS taxes that basis twice. We maintain it as part of the engagement. Protects every after-tax dollar in the IRAs Your own return ## Send us last year's 1040. We will send back this report with your numbers. Tax-centric wealth management from a CPA and CFP® who files the return and builds the plan. Fee-only, fiduciary, built for federal employees, veterans, executives and business owners. James M. Simon, CPA, CFP® · This email address is being protected from spambots. You need JavaScript enabled to view it. · 703-737-2220 [Schedule a tax review](https://calendly.com/jsimon-jhe/complimentary-consultation)