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Reducing AGI - any ideas?

January 29th, 2009 at 03:43 am



My hubby is in school so we need to get the taxes done and fill out the FAFSA as quickly as possible. I am awaiting one W-2 as well as the forms from DH's school telling us how much we paid last year in tuition & fees.

I have been playing with the numbers and it looks like we made a lot more than we ever have before - which is great! Smile 2008 was my first full year as a hygienist so that is the reason we did so well, but I am worried now that we may not be awarded as much as we need for DH's school for the '09-10 school year. That is why I am looking for ways to lower our AGI.

I thought if I put in a bunch to my Roth IRA that it would reduce our AGI but when I try that in our tax software it does not change anything. I was sure that would work so now I am not sure how to proceed.

We do not own a home so no mortgage stuff for us. We do have a child but she is school-aged so no child care expenses. Do you happen to know another way to reduce our AGI?

Posted in Other Money Stuff | 7 Comments »

7 Responses to “Reducing AGI - any ideas?”

  1. homebody Says:
    January 29th, 2009 at 12:40 pm 1233232806
    1233232806

    A Roth is after tax dollars, what about a traditional IRA?

  2. mooshocker Says:
    January 29th, 2009 at 01:22 pm 1233235378
    1233235378

    Stole my thunder Homebody. Look at a 401K, Simple/Standard IRA. These investments will reduce your AGI by the amount invested. Thus, if your increase is 10k per year, dump it into an IRA for long term growth. God bless.

  3. Ima saver Says:
    January 29th, 2009 at 02:12 pm 1233238351
    1233238351

    I agree, open a regular IRA!!

  4. LuxLiving Says:
    January 29th, 2009 at 03:06 pm 1233241569
    1233241569

    I googled 'Reducing AGI' and a number of things came up - you might want to check them out. Here's the link to the first article which has some good ideas. The richest will tell you that reducing taxes is the number one way to improving your bottom line:

    Text is
    http://ezinearticles.com/?The-Most-Important-Number-on-Your-Tax-Return&id=79661 and Link is
    http://ezinearticles.com/?The-Most-Important-Number-on-You...

  5. creditcardfree Says:
    January 29th, 2009 at 03:13 pm 1233242001
    1233242001

    You need to do a recharacterization of your roth ira's. You need to do this by April 15th of this year. It may not need to be the full amount you invested. A contribution to an IRA, will reduce your AGI by the same amount. So, a $5000 traditional ira contribution will reduce your AGI by $5K.

    A recharacterization is simply renaming the money you've invested. It does not change amounts invested or when they were invested or the number of shares you bought. Simply a new title...Traditional Ira. Call the company you invested with to do this. I think it can be done over the phone, otherwise you need to send a letter. Once you have confirmation that it was completed then you can file your taxes.

    Increasing 401K contributions this year, will only help next tax year.

    Good luck!

  6. zetta Says:
    January 29th, 2009 at 10:48 pm 1233269308
    1233269308

    Do you have a Flexible Spending Account available at work? These dollars come out pre-tax, although I'm not sure if they reduce AGI. Check whether after-school care (if you are using it) is covered under dependent care.

  7. MarianneJ Says:
    January 31st, 2009 at 07:32 pm 1233430343
    1233430343

    Oh what a goofball I am! I should have known that about the Roth vs the traditional IRA. Thanks for the reminders! Wink Unfortunately, no flex account at the small office where I work.

    Not that it is a great thing, but we did pay close to $1400 in student loan interest last year so our AGI was reduced by that much. If we put $2,000 into a traditional IRA it will increase our rebate by $500 so we may go this route also, but I'll have to use money from the EF to fund it...so I'm not sure.

    Thanks for all the helpful advice! Smile

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