David kicks off the conversation by revealing that tax rates will revert to where they were in 2017 – you have only four years to take advantage of the historically low tax rates and do a Roth conversion.
David explains that most people will try to accelerate their Roth conversion efforts before the 2026 deadline. The problem with this is that trying to accelerate your conversions could bump you into the dreaded 32% tax bracket.
You don’t have to be a mathematician to realize that the 32% tax bracket is a 33% increase over the 24% – and an unnecessary expense to your Roth conversion strategy.
According to David, the 24% tax bracket is the sweet spot in Trump’s tax cuts because for an additional 2% on the margin, you can convert an extra $160,000.
David points out that the people who accelerate their Roth conversions and end up in the 32% tax bracket will be paying more to the IRS than is absolutely necessary.
David explains why the 32% tax bracket is the riskiest region of our current tax laws.
David believes the easiest way to get ahead of the 2026 deadline is to extend your Roth conversions past 2026 to 2028 – the three more years will guarantee that you stay in the 22 and 24% tax brackets.
Although taxes are going up in 2026, David believes you don’t need to move heaven and earth to complete your Roth conversions. As long as you remain in the future versions of the 22 and 24% tax brackets, you will be safe.
Regardless of who takes office in 2024, David maintains that Trump’s tax cuts will likely be extended, and the taxes for the American middle class will likely stay the same.
David explains why the year you should be worried about is 2030 and not 2026 when it comes to the risk of rising taxes.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube