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Capital Gains, Income Tax, Property Tax and Mortgage Interest Deductions
Old 11-14-2013, 09:52 AM   #1
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Capital Gains, Income Tax, Property Tax and Mortgage Interest Deductions

This may be obvious for some, not for me.

If my retirement income is comprised solely of long and short term capital gains, can I continue to itemize my deductions which would include property taxes and mortgage interest?

The reason I am asking is because I am trying to estimate my effective tax rate and tax liability in retirement.

And if all of my income while in retirement came from savings, then there would no income tax liability, right?

And if my income in retirement comes from a 72t election, or from a pension or social security, then the majority of that income would be taxed at then current income tax rates?

Thanks for the insight.
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Old 11-14-2013, 11:04 AM   #2
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Yes you can continue to itemize. You may have a tax liability, since capital gains could exceed the 0% CG tax bracket. Certainly non-qualified dividends and interest, if you have them, will give you normally taxable income. Since 72t comes from an IRA, it will be taxed as normal income. I believe pension taxes will depend on if any post-tax income went to pay for it, and on what state you live in. I've been assuming 100% taxable for ours.

Only some of SS is taxable, depending on your other income.

Turbo Tax should have a calculator you can play with to help out with the details.
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Old 11-14-2013, 11:06 AM   #3
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Originally Posted by nico08 View Post
This may be obvious for some, not for me.

If my retirement income is comprised solely of long and short term capital gains, can I continue to itemize my deductions which would include property taxes and mortgage interest? YES.........google form1040 and look at both sides (for income and deduction)

The reason I am asking is because I am trying to estimate my effective tax rate and tax liability in retirement.

And if all of my income while in retirement came from savings, then there would no income tax liability, right? YES assuming it was not from capital assets w/ gains.

And if my income in retirement comes from a 72t election, or from a pension or social security, then the majority of that income would be taxed at then current income tax rates? MAYBE.....for SS , depends on other income.
May not even be taxed. Google......taxation of SS

MIGHT be good to run your situation thru a tax calculator. Google for Taxcaster.

Thanks for the insight.
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Old 11-14-2013, 11:41 AM   #4
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Income Tax Calculator - Tax-Rates.org

I found this calculator useful as it covers off both federal and state income taxes. It isn't perfect, for example, there are some nuances of my state's income tax calculation that it doesn't consider, but I think overall it is good.

You could input your current/expected in retirement data into this to get a feel for your tax burden in retirement.

In most cases I can think of you can itemize deductions.
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Old 11-14-2013, 12:30 PM   #5
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Income Tax Calculator - Tax-Rates.org

I found this calculator useful as it covers off both federal and state income taxes. It isn't perfect, for example, there are some nuances of my state's income tax calculation that it doesn't consider, but I think overall it is good.

You could input your current/expected in retirement data into this to get a feel for your tax burden in retirement.

In most cases I can think of you can itemize deductions.
I lost interest in this site the minute they confused 'capital' with 'capitol'. If you make this kind of mistake on a website, how reliable can it be? re: "Long Term Capitol Gains".

I prefer the Turbo Tax TaxCaster which gives you a pretty good/quick idea of your tax issue.
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Old 11-14-2013, 03:06 PM   #6
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I lost interest in this site the minute they confused 'capital' with 'capitol'. If you make this kind of mistake on a website, how reliable can it be? re: "Long Term Capitol Gains".

I prefer the Turbo Tax TaxCaster which gives you a pretty good/quick idea of your tax issue.
Well, I like Taxcaster too , but I'd pick on something other than a possible typo.
Such as LT & ST CGs don't appear to be netted against each other before
interacting w/ other income; no mention of qualified divs that I noticed in a cursory look; taxable component of SS is requested as input...........I suspect if someone knew how to calculate that (normally you'd use the tax calculator to figure that out for you), then you wouldn't need the calculator.
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Old 11-14-2013, 04:24 PM   #7
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Well, I like Taxcaster too , but I'd pick on something other than a possible typo.
.
Agreed with your other points, but I didn't consider it a typo. A typo is when you hit the wrong key.

To me, if you're in the tax/financial business and the word 'capitol' doesn't jump out at you, then someone isn't paying enough attention to warrant my time, let alone trust them with a financial report, i.e. what else is slipping through the cracks.

I know, I know, I'm being anal...and I'm not trying to be the spelling police; I just want a little competence, especially when it comes to money.

End of rant!
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Old 11-14-2013, 04:41 PM   #8
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Agreed with your other points, but I didn't consider it a typo. A typo is when you hit the wrong key. To me, if you're in the tax/financial business and the word 'capitol' doesn't jump out at you, then someone isn't paying enough attention to warrant my time, let alone trust them with a financial report, i.e. what else is slipping through the cracks. I know, I know, I'm being anal...and I'm not trying to be the spelling police; I just want a little competence, especially when it comes to money. End of rant!
A capitol offense? :P
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Old 11-14-2013, 04:48 PM   #9
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One should itemize when their itemized deductions exceed the standard deduction.

We will take the standard deduction this year because our property taxes and charity giving will not exceed the standard deduction. We have no mortgage interest and no state income tax. However, ...

We didn't pay any property taxes in 2013 and made no charitable contributions in 2013 either. We just donated to charity out of our donor-advised fund for which we got a tax deduction last year.

We will be pay property taxes the first week of January 2014 and contribute to our donor-advised fund then as well. In December 2014, we will pay property taxes and contribute to our donor-advised fund then as well. Do you see how we put 2 years of property taxes and 2 years of charitable contributions into a single tax year?

This is called "bunching of deductions". It saves us a few thousand dollars in taxes that we would otherwise not be able to avoid.
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Old 11-14-2013, 05:31 PM   #10
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Agreed with your other points, but I didn't consider it a typo. A typo is when you hit the wrong key.
I agree w/ you that it's not a typo.............since it's consistently spelled that way at least 4x and I didn't see a single correct spelling ..............
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Old 11-14-2013, 05:42 PM   #11
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And if all of my income while in retirement came from savings, then there would no income tax liability, right?
Our situation. No Taxes for 24 years. Legally. ..though we may be liable if and when we go further into our IRA's or I bonds. Must watch state taxes.
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Old 11-14-2013, 05:53 PM   #12
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With my itemized deduction hovering around the amount of the standard deduction the last few years, I was going to bunch my deductions until the ACA came in. Because I am near the top end of the income limit to receive a subsidy, I am shying away from bunching now because part of my deductible property taxes is offset the following year by a state property tax rebate. The rebate (like a state income tax refund), instead of being treated as a negative deduction, is treated as above-the-line income and counts in the (M)AGI used to determine the subsidy. So I have to take another look at bunching to make sure it will pay off.
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