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How much taxes do I have to pay in retirement?
Old 06-15-2017, 04:21 PM   #1
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How much taxes do I have to pay in retirement?

Hi, as I am getting closer to retirement, I would like to know my estimated taxes, to my surprise, it's not much at all!!! This year I will have about 100k in dividends from my taxable account. 70k qualified dividends and 30k ordinary dividends. I plug in the numbers in a online tax calculator, I have to pay only $245. Is this even right? This is for married filing jointly, with 1 dependant (daughter). TX. Standard deduction, and personal exemption included. I will also contribute $6750 to HSA account.
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Old 06-15-2017, 04:34 PM   #2
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The tax structure in retirement is no different than at any other time- except there is an increased standard deduction( if you use that- age 65 and older-that is not dependent on being retired.). If that is your only income -ie no Social Security, no pension( states vary on how that is taxed), no K-1, IRA withdrawal, etc then that is your income. You had better read up on HSA contributions if you are not drawing a salary, consulting, etc once you are retired,.
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Old 06-15-2017, 04:41 PM   #3
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Quote:
Originally Posted by Rainbowdash View Post
Hi, as I am getting closer to retirement, I would like to know my estimated taxes, to my surprise, it's not much at all!!! This year I will have about 100k in dividends from my taxable account. 70k qualified dividends and 30k ordinary dividends. I plug in the numbers in a online tax calculator, I have to pay only $245. Is this even right? This is for married filing jointly, with 1 dependant (daughter). TX. Standard deduction, and personal exemption included. I will also contribute $6750 to HSA account.
If that is correct, can i borrow that estimator when i do my taxes.. I get punched in the throat every year at tax time.
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Old 06-15-2017, 04:41 PM   #4
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An HSA contribution is fine without a salary.


I'd just be running the numbers like you but I suspect most of your ordinary dividends are absorbed by the exemptions and deductions, and most of the Qdivs are at 0%.


The question is, do you have a tIRA or 401K, and what will you be paying when MRDs kick in, with SS benefits on top of that? If you have those, you probably want to look at converting some of them each year to a Roth.
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Old 06-15-2017, 04:51 PM   #5
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HSA contributions in retirement is allowed only with certain conditions. Certainly not every retired person qualifies. Age, Medicare and type of policy have to be considered.
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Old 06-15-2017, 05:21 PM   #6
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Originally Posted by joeprintz View Post
HSA contributions in retirement is allowed only with certain conditions. Certainly not every retired person qualifies. Age, Medicare and type of policy have to be considered.
OK, but it has absolutely nothing to do with whether you are drawing a salary or getting consulting money as you strongly inferred. This is the early retirement forum. You can't assume that someone who says they are retiring is 65 or older.
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Old 06-15-2017, 05:40 PM   #7
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Originally Posted by Rainbowdash View Post
Hi, as I am getting closer to retirement, I would like to know my estimated taxes, to my surprise, it's not much at all!!! This year I will have about 100k in dividends from my taxable account. 70k qualified dividends and 30k ordinary dividends. I plug in the numbers in a online tax calculator, I have to pay only $245. Is this even right? This is for married filing jointly, with 1 dependant (daughter). TX. Standard deduction, and personal exemption included. I will also contribute $6750 to HSA account.
Might need to know a little more (e.g., your and your daughter's ages), but a quick calculation goes like this:
Code:
Gross      100,000
HSA         -6,750
Std. Ded.  -12,700
Pers. Ex.  -12,150
--------  --------
Taxable     68,400
Because your taxable amount is less than your qualified dividends, and that amount is below the top of the 15% bracket for ordinary income (which is also the top of the 0% bracket for qualified dividends) you would owe $0.

If you don't mind spreadsheets, one maintained on the MMM forum does a good job estimating many common federal tax situations: Case Study Spreadsheet updates
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Old 06-17-2017, 07:12 AM   #8
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Originally Posted by joeprintz View Post
The tax structure in retirement is no different than at any other time- except there is an increased standard deduction( if you use that- age 65 and older-that is not dependent on being retired.). If that is your only income -ie no Social Security, no pension( states vary on how that is taxed), no K-1, IRA withdrawal, etc then that is your income. You had better read up on HSA contributions if you are not drawing a salary, consulting, etc once you are retired,.
I think you are correct (no expert here) regarding the Fed tax system. States handle taxes differently and many states do give breaks to either/or retired folks, folks of a certain age.

I agree that now might be the time to convert tIRAs/401(k)s to Roths within the tax bracket that best suits OPs situation. This bracket may change abruptly when income begins to flow (RMDs, SS, Pensions, etc.) as mentioned by others. It can be complicated and (for me) difficult to keep on top of. YMMV
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Old 06-17-2017, 07:35 AM   #9
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HSA contributions in retirement is allowed only with certain conditions. Certainly not every retired person qualifies. Age, Medicare and type of policy have to be considered.
Once someone is 65 and eligible for Medicare they are no longer able to contribute to an HSA.

But until then, as long as they have an HSA compatible insurance policy, they can contribute regardless of employment status and AGI.

Since many folks here are on the early retirement forum are seeking retirement before 65, many of us retirees do contribute to HSAs until 65.
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Old 06-17-2017, 11:01 AM   #10
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Try plugging your numbers into taxcaster. When I do it, I get same results as SevenUp. It looks to me like you have zero federal tax liability.
BTW - in tax caster, no specific input for HSA contribution...so I just took it off your ordinary income (30,000-6750 = 23250).
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Old 06-17-2017, 11:23 AM   #11
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$245 might be too high. $0.00 is probably a better estimate.

Even taxcaster doesn't get everything right. For instance, maybe you have $400 in a foreign tax credit?

That's why I like to do my own taxes with bona fide real tax software downloaded onto my computer such as HRBlock deluxe, so that I can be in the ~45% of families that don't have to pay Federal income taxes or accountants or internet folks to work this out for me
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Old 06-17-2017, 11:25 AM   #12
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Taxcaster said I would get back thousands of dollars last year and I didn't. Foreign Tax credit was the kicker.
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Old 06-17-2017, 11:27 AM   #13
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OK, but it has absolutely nothing to do with whether you are drawing a salary or getting consulting money as you strongly inferred. This is the early retirement forum. You can't assume that someone who says they are retiring is 65 or older.


That is me...A pensioner little to no income...This is my last refuge for a meaningful tax break. I hope they double the limit soon like they yapping about on The Hill before the quagmire occurred.
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Old 06-17-2017, 11:43 AM   #14
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Even taxcaster doesn't get everything right.
...
That's why I like to do my own taxes with bona fide real tax software....
+1

Using the "real thing" instead of "teaser" software such as TaxCaster is much better.

For quick estimates, the spreadsheet referenced in post #7 does seem decent - at least, it seems to cover more situations than TaxCaster and has this year's tax law changes already included.
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Old 06-17-2017, 12:46 PM   #15
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Taxcaster said I would get back thousands of dollars last year and I didn't. Foreign Tax credit was the kicker.
I use the hope and pray method to estimate my taxes. We go to the tax man and hope its not too much. Then i pray i have enough in the checkbook to cover.
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Old 06-17-2017, 12:49 PM   #16
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FWIW, I've used this for years to estimate taxes. Easy to use and very accurate in my experience.

1040 Tax Calculator
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Old 06-17-2017, 02:09 PM   #17
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That's why I like to do my own taxes with bona fide real tax software downloaded onto my computer such as HRBlock deluxe
I've found so many bugs in programs like HRBlock, that I find if you don't understand the tax law, and have a general idea what your taxes should be, the software and interview will generate mistakes that you won't even notice if you don't understand the underlying calculation.

If you understand the calculation, then it's fine to use tax software. But, I also find the software's interview and data entry process so onerous, that for ESTIMATING my taxes I find it easier and quicker to use a spreadsheet (of my own making). I use the software for doing ACTUAL taxes because it prints out all the forms, efiles, lets me make small corrections, etc. much easier.
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Old 06-17-2017, 03:22 PM   #18
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Quote:
Originally Posted by Rainbowdash View Post
Hi, as I am getting closer to retirement, I would like to know my estimated taxes, to my surprise, it's not much at all!!! This year I will have about 100k in dividends from my taxable account. 70k qualified dividends and 30k ordinary dividends. I plug in the numbers in a online tax calculator, I have to pay only $245. Is this even right? This is for married filing jointly, with 1 dependant (daughter). TX. Standard deduction, and personal exemption included. I will also contribute $6750 to HSA account.
Actually it is zero.... $30,000 of ordinary dividends - $6,750 HSA - $12,700 standard deduction - $12,150 of exemptions is negative and the qualified dividends will be 0% since the total taxable income of $68,400 is well below the $75,900 top of the 15% tax bracket. You can probably do $7,500 of Roth conversions at 10% tax.
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Old 06-17-2017, 08:07 PM   #19
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Is this where you are? Never Pay Taxes Again
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Old 06-17-2017, 08:11 PM   #20
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Is this where you are? Never Pay Taxes Again
If I had some idea of where that link led I might click on it. Since it's naked, I'm afraid of what I might see.
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