I start my first ever well paying job in two weeks. Since I start halfway through this year, my tax bill for 2011 will be much lower than 2012. Is there anything I can do to take advantage of this?


For 2011, use a Roth IRA and Roth 401(k) for retirement savings. If in '12 you will be in 25% bracket, go pretax. You're not likely to itemize, so shifting donations and other deductions wouldn't apply (but would for others with variable income).

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  • Yes. The Roth IRA is a good deal for people who are paying lower taxes now than they will be at retirement. If your taxes are extra-low this year, it's an extra-good deal. – user296 May 26 '11 at 4:06

Enjoy the lower tax bill for 2011. But then again, you'll likely earn less in 2011 than you will in 2012 and beyond. Oh well.

Any tax advantages you might get for doing X come at a price. Count the cost.

This wasn't part of your question, but try to sock away as much as you can with this new job of yours. Resist the temptation to drastically raise your spending levels to match your new income. Pretend that you're (more or less) as "poor" as you were before the new job. Your future self will thank you.

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  • 2
    Doesn't answer question but MB, we have to keep telling people how to get started right. Your advice, if taken, will save this guy far more than any small tricks there are tax-wise this year. Good answer. – JTP - Apologise to Monica May 25 '11 at 21:29

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