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Old 02-09-2015, 09:22 PM   #61
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No, all dividends are included in AGI and MAGI.
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Old 02-09-2015, 10:07 PM   #62
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For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.
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Old 02-09-2015, 10:13 PM   #63
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For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.
And the 400% is O-MAGI, so these deductions, like HSAs, can give some added headroom:

http://laborcenter.berkeley.edu/pdf/..._summary13.pdf
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Old 02-10-2015, 06:37 AM   #64
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For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.
Thanks - I was thinking about cost-sharing for the OOP max (not subsidies for the premiums) and knew that was around $39K for a 2 person household.
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Old 02-10-2015, 08:14 AM   #65
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I don't understand how you linked an evening of hopped up fun with my buddies to a discussion of the IRC and our federal government's fiscal policies. Maybe you can enjoy a beer at my house some time and expand on that?
Fuego, I'm sorry for singling you out, and I would gladly join you for a beer (I'd even bring a six-pack with me) if I came to NC. I was reacting to the general tone of some of the discussion which is "isn't it cool that I can avoid paying tax to the federal government?" I think we have to keep in mind that we are the government. It may not feel like that a lot of the time, but if some people don't pay tax, others have to pay more. It's not like the government is going to make do with less. Either tax rates will go up, or we'll pass bigger deficits to pass onto the children and grandchildren. Someone has to pay.

The guy who excuses himself for the restroom as everyone is draining their glasses is pushing off the cost of the next round to other people. I recognize that a big part of the problem are the loopholes in the Tax Code that allow people with high income to avoid paying anything, while forcing working people to continue paying. But taking advantage of the loopholes shouldn't be a source of pride, as it sounds like it is to some people.

While avoiding federal tax doesn't mean these people are able to avoid state and local tax, it does mean that these people are not paying anything for the services that the federal government provides. Economists call this a "free-rider problem". there is another word that begins with "free" that some peole might use, but I'll leave it out of this discussion.

Sorry if I sound cranky about this, but it does irk to pay tax while people with much higher incomes brag about not paying tax.
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Old 02-10-2015, 08:30 AM   #66
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Being poor helps... no Federal or State taxes since 1990. Funny... don't feel poor. Just following the rules and being honest.
The "tax" part may change a bit as we begin to withdraw taxable income. Even at that, taxes will be minimal.

Surprising how much thngs like homestead exemptions and tax freezes and available assistance to seniors has helped. All legal and provided by law... not as welfare, but just by understanding the rules. As state laws have tightened, many cutbacks, but many stil exist. Transpoortation subsiidies, free cell phones, medical prescription assistance, reduced drivers license costs and free legal help.. Surprisingly many of these benefits do/did not take into consideration net worth, but income. Some years ago, I checked to see the participation level, and found that less than 20% of those who were elegible, actually applied.

The other part of "no surprises" comes from Medicare and Social Security,which have served us so well over the later years. Not only has it made life feel more secure, but in all of those years, not a single problem of any kind.
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Old 02-10-2015, 08:47 AM   #67
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Davis, I see this as people sharing money saving strategies. I stand by my earlier comment that the goal should be to have the most after-tax return, not to pay the fewest taxes possible. The primary reason is to get the best return, but I also don't have a problem paying my share of taxes--but I'll use every legal method to reduce what I pay.

As far as the drink analogy, many of us had been buying a few extra rounds for many years while working. If I've paid for more than my share of rounds over the years, I'm not going to apologize for walking away from the table once in awhile before the check comes. I've already paid a LOT of taxes to both the states I've lived in and the feds.
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Old 02-10-2015, 08:52 AM   #68
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+1 for many years while I was working I paid more in taxes than the average person makes (gross) so I have no reservations of "taking advantage" of the code and paying relatively little taxes now.
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Old 02-10-2015, 11:43 AM   #69
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Originally Posted by Davis65 View Post
Fuego, I'm sorry for singling you out, and I would gladly join you for a beer (I'd even bring a six-pack with me) if I came to NC. I was reacting to the general tone of some of the discussion which is "isn't it cool that I can avoid paying tax to the federal government?" I think we have to keep in mind that we are the government. It may not feel like that a lot of the time, but if some people don't pay tax, others have to pay more. It's not like the government is going to make do with less. Either tax rates will go up, or we'll pass bigger deficits to pass onto the children and grandchildren. Someone has to pay.

The guy who excuses himself for the restroom as everyone is draining their glasses is pushing off the cost of the next round to other people. I recognize that a big part of the problem are the loopholes in the Tax Code that allow people with high income to avoid paying anything, while forcing working people to continue paying. But taking advantage of the loopholes shouldn't be a source of pride, as it sounds like it is to some people.

While avoiding federal tax doesn't mean these people are able to avoid state and local tax, it does mean that these people are not paying anything for the services that the federal government provides. Economists call this a "free-rider problem". there is another word that begins with "free" that some peole might use, but I'll leave it out of this discussion.

Sorry if I sound cranky about this, but it does irk to pay tax while people with much higher incomes brag about not paying tax.
I think you're ignoring that folks who have amassed enough wealth to quit working and as a result have low income from tax efficient investments have already paid a huge amount in taxes. Folks who have amassed large amounts in tax deferred funds will pay plenty of income taxes as they withdraw that money to live off of in retirement. Income from investments is taxed differently from earned income in this country so it's not surprising to see retirees living off their investments have a greatly reduced tax rate. And some people choose to live on less and pay less taxes, and there is nothing wrong with that.
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Old 02-10-2015, 11:47 AM   #70
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For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.
Exactly!
That is what I meant. In fact it makes couple eligible to qualify for quite nice subsidy. While since it is qualified dividend you end up with no Federal Tax (If you don't have any other income)
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Old 02-10-2015, 11:50 AM   #71
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Davis, I see this as people sharing money saving strategies. I stand by my earlier comment that the goal should be to have the most after-tax return, not to pay the fewest taxes possible. The primary reason is to get the best return, but I also don't have a problem paying my share of taxes--but I'll use every legal method to reduce what I pay.

As far as the drink analogy, many of us had been buying a few extra rounds for many years while working. If I've paid for more than my share of rounds over the years, I'm not going to apologize for walking away from the table once in awhile before the check comes. I've already paid a LOT of taxes to both the states I've lived in and the feds.
Well for patient ones close to 100% equities is not only Tax efficient (qualified dividends) it is also generates best return.
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Old 02-10-2015, 12:08 PM   #72
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It's not like the government is going to make do with less. Either tax rates will go up, or we'll pass bigger deficits to pass onto the children and grandchildren. Someone has to pay.
Sure they could cut spending. Look at the U.S. budget side by side by category compared to other first world countries. Our defense budget in 2011 was more than the next top 13 nations combined:

America’s staggering defense budget, in charts - The Washington Post

As far as taxes are you talking lifetime or one year periods? Many of us paid more than our fair shares in the W2 years and will again once RMDs kick in.

When we go out with friends and family usually we all haggle over wanting to pick up whole tab - everyone usually offers to pay the entire bill. I don't think there is a direct comparison to paying for dinner for close friends or paying more in taxes to help offset Google and Apple's tax breaks. It's Apples and oranges.
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Old 02-10-2015, 12:32 PM   #73
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Well for patient ones close to 100% equities is not only Tax efficient (qualified dividends) it is also generates best return.
Sure, but to tap into that portfolio to live off of, you have to sell a little, and the realized gains are taxable once your total income (AGI) exceeds $73K for married filing jointly.

But yes, if your only source of income is long-term realized gains and qualified dividends, you are tax-free for incomes under around $95K. That's how our tax code works.
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Old 02-10-2015, 12:37 PM   #74
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Sure, but to tap into that portfolio to live off of, you have to sell a little, and the realized gains are taxable once your total income (AGI) exceeds $73K for married filing jointly.

But yes, if that was your only source of income and it paid no dividends, you are tax-free for incomes under around $90K. That's how our tax code works.
I don't need to sell anything. I just need about 2 million in equities. That will pay 50k in dividends with minimal variation during market ups and downs and with dividend growth most likely exceeding inflation rate.
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Old 02-10-2015, 12:39 PM   #75
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I don't need to sell anything. I just need about 2 million in equities. That will pay 50k in dividends with minimal variation during market ups and downs and with dividend growth most likely exceeding inflation rate.
Same difference - I was still modifying my post from above. Either way - long-term realized gains or qualified dividends or a combination of the two.
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Old 02-10-2015, 12:42 PM   #76
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The question is how hard are you going to work to ensure you don't contribute to the public services from which you benefit? And how proud are you of not paying your share? People like Fuego seem to be happy to take money from other taxpayers, but proud of contributing as little as they can. That means everyone else pays more. If you go out for drinks with your coworkers, do you buy a round, or slip off to to restroom when your turn comes up and hope they don't notice?

I'm retired, age 50, and this year I will pay zero in federal income tax and will actually receive a small ACA subsidy.

I am VERY proud to have lived simply and saved my after tax money to put myself in a position to retire early and consequently significantly lower my income tax payments.

I pay the taxes that are legally required of me. Is this my "fair share"? Interesting how the same politicians that pass the tax laws turn around and accuse the people that obey those laws of not paying their "fair share".

Keep in mind that those of us who don't pay much income tax do pay property taxes, sales taxes, and a multitude of others that no one talks about.


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Old 02-10-2015, 12:51 PM   #77
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While avoiding federal tax doesn't mean these people are able to avoid state and local tax, it does mean that these people are not paying anything for the services that the federal government provides. Economists call this a "free-rider problem". there is another word that begins with "free" that some peole might use, but I'll leave it out of this discussion.

.

"Free rider"? People have a responsibility to pay the taxes required of them by law. How does not paying more than what is required according to the laws passed by the people's elected representatives make someone a "free rider" or any other word beginning with "free"?


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Old 02-10-2015, 01:02 PM   #78
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The question is how hard are you going to work to ensure you don't contribute to the public services from which you benefit? And how proud are you of not paying your share? People like Fuego seem to be happy to take money from other taxpayers, but proud of contributing as little as they can. That means everyone else pays more. If you go out for drinks with your coworkers, do you buy a round, or slip off to to restroom when your turn comes up and hope they don't notice?
For years I have contributed the legal maximum to my 401k plan at work. At the same time I knew workers who preferred to buy a more expensive car (my car finally broke down after 250,000 miles) than me or the latest TV or whatever instead of contributing to their 401k.

We all make our choices. I chose to make sacrifices when I was younger so I would have a chance to retire earlier. I chose, unlike a lot of people, to live a more spartan like life so I would have more resources when I was older. Why I should I now be punished for that?

By the way, I have paid plenty of taxes and always followed the law. If you don't like the law, the law should be changed.
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Old 02-10-2015, 03:05 PM   #79
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For years I have contributed the legal maximum to my 401k plan at work. At the same time I knew workers who preferred to buy a more expensive car (my car finally broke down after 250,000 miles) than me or the latest TV or whatever instead of contributing to their 401k.

We all make our choices. I chose to make sacrifices when I was younger so I would have a chance to retire earlier. I chose, unlike a lot of people, to live a more spartan like life so I would have more resources when I was older. Why I should I now be punished for that?

By the way, I have paid plenty of taxes and always followed the law. If you don't like the law, the law should be changed.
I don't think you are the person who has a $200,000 income in retirement and pays no FIT. Your 401k withdrawals are taxed as ordinary income (at least mine are).

And, I don't feel like I'm being "punished" for saving. I took the money that would have bought a nice car (after taxes) XX years ago, saved it in my 401k, and doubled it. Today, I can withdraw the accumulated amount, and (after taxes) buy two nice cars, or one luxury car. I feel like saving worked out very well for me.
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Old 02-10-2015, 03:12 PM   #80
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Interesting how the same politicians that pass the tax laws turn around and accuse the people that obey those laws of not paying their "fair share".
I don't think most of them are quite that hypocritical.
A bill comes up to raise the capital gains tax rate above the current 15%. Rep A votes for the bill, rep B votes against it. The majority of reps vote with B, and the bill fails. The cap gain rate stays at 15%.

Late, rep A complains that high wealth people "don't pay their fair share". He's not hypocritical, he's just in the minority.
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