A lot of people dream about the day they finally finish paying off the mortgage. Free and clear, baby!
What might you be willing to pay to live in this house you already own? Economists refer to this concept of a mortgage-free living space having market value as “imputed rent.” Some countries even tax it.
Beyond being a fun topic at cocktail parties, for most people imputed rent has few real-world considerations… you pay off the house and you have more $$$ every month. Good times.
But for an early retiree with a tax-minimization hobby, the choice to pay rent or imputed rent has some interesting implications.
We will never have the experience of receiving an inheritance, but GCC Jr will.
In my role as fiscal steward, I would like to ensure that he, along with our other beneficiaries, receive the largest amount possible. (After we are done spending as much as we want, naturally.)
But Jr only gets what the IRS doesn’t take, so I’m taking my tax efforts to the next level: multi-generational tax minimization.
Hey GCC, the Foreign Earned Income Exclusion is amazing! Thank you so much for making me aware of this – I’m able to pay no tax on my entire earned income! I also saw on your blog that it is possible for a married couple to earn about $100,000 in qualified dividends and long-term capital gains. Can I do that too?! That is, since the FEIE excludes all of my overseas work income, can I also harvest $100k of capital gains tax free?! Cuz that would be sweet!`
I agree that would be sweet. But no. Mostly.
The end of 2018 marked the completion of 6 full years of early retirement and world travel.
It’s been a fun ride so far… we’ve traveled a bit, had a few good meals, and taken many naps.
But how effective have these 6 years been in terms of implementing our tax minimization strategies? Are Roth IRA Conversions, Capital Gain Harvesting, and nomadic strategery just fantasies we keep while working, or do they actually produce results in the real world?
Let’s do a financial check-up and see how we are doing.
It’s April 15th again, time to play with taxes!
2018 is the first tax year under the Tax Cuts and Jobs Act, our 6th tax year as early retirees, and our 1st retirement year paying income taxes.
I guess it was good while it lasted… even if it was optional.
Frugality is a popular concept in the world of retirement investing.
A low cost of living has a double benefit – you spend less/save more, and a lower net worth is required to support early retirement.
But most people don’t want to live uber-frugally, ourselves included.
That’s why we just front-loaded it.