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Old 03-17-2009, 03:32 PM   #21
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Well, thanks for not saying "Madoff," anyway...
Jeez, ziggy, I'd never say that. You're too nice a dog. Besides, madoff got busted an' you're still free.

'course, if you were sayin' that your tax rate was lower 'cause you left out the deferred tax on the 401K, and then you nominated yourself for a low tax rate bonus, got the board to fund it , then the members had to pony up to keep the board open, well... that'd be another story altogether.
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Old 03-17-2009, 09:34 PM   #22
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Yep, you really need to define "effective rate". TaxAct gave me a different number than what I would calculate. They calculate before credits. I'd calculate on my total out of pocket towards taxes divided by AGI (which is a funny number to begin with).

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Old 03-18-2009, 07:37 AM   #23
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I have been traveling and haven't been able to follow posts closely. Soooo, what is this "SIRED" acronym I am seeing? It isn't on the acronyms list (or at least not on the thread that listed acronyms that I found).
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Old 03-18-2009, 09:35 AM   #24
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Just did the 2008 returns last night. Fed marginal bracket is 15% and average rate is 2.5%. State marginal rate is 7% and average rate is 3%. State tax burden was higher than federal this year. All this on a six figure gross income.
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Old 03-18-2009, 10:27 AM   #25
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I have been traveling and haven't been able to follow posts closely. Soooo, what is this "SIRED" acronym I am seeing? It isn't on the acronyms list (or at least not on the thread that listed acronyms that I found).
I've heard that the "S" stands for "secure" -- those with pensions and retiree health coverage.

Of course, even that has degrees and nuances; since I have a tiny (frozen and non-COLA'd) pension from a previous employer coming to me in the future, some would say I'm SIREd but the pension is small enough that the combination of that pension and SS will be not even close to being enough, so I consider myself more FIREd than SIREd since there's no way I can retire without substantial savings and investments on my own.
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Old 03-27-2009, 11:09 PM   #26
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Overall effective tax rate (computed as (Income tax+ self employment tax)/AGI) = 24%

The "self employment tax" is the tax paid by self-employed persons to fund SS and Medicare. The tax is 15.3% (though the tax code mercifully alllows people to take a deduction for 1/2 of the amount paid from their income before computing the "regular" income tax, which reduces the bite somewhat).

It looks like a lot of folks probably didn't include their payroll taxes when they responded to this question. It looks like the present method of deducting SS and Medicare from paychecks is having the intended result of making these taxes less noticeable/objectionable to taxpayers. If we added these taxes (the total 15.3% of pay--whether paid by the employer or the emploee, the truth is that it is part of the compensation total the employee would otherwise receive) we'd have a more complete picture of what we pay to the government.

My effective tax rate without the SS/Medicare component (Income tax/AGI) = 11.6%
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Old 03-28-2009, 09:24 PM   #27
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We just did our 2008 taxes a few weeks ago. Marginal rate = 28%, effective tax rate = 16%
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Old 03-28-2009, 09:38 PM   #28
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It looks like a lot of folks probably didn't include their payroll taxes when they responded to this question. It looks like the present method of deducting SS and Medicare from paychecks is having the intended result of making these taxes less noticeable/objectionable to taxpayers. If we added these taxes (the total 15.3% of pay--whether paid by the employer or the emploee, the truth is that it is part of the compensation total the employee would otherwise receive) we'd have a more complete picture of what we pay to the government.
Payroll taxes only apply to earned income and not dividends and capital gains. I'm assuming most retired folks and many Young Dreamers have a significant portion of income from passive investments that don't have payroll taxes assessed.

When I'm looking at my marginal rate on earned income, I use the employee portion of payroll taxes only, since I can't get the employer portion under our current system of taxation. And if I run my pay through a cafeteria plan, I only avoid the employee portion of payroll taxes and do not recoup the employer part - they keep it.
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Old 03-29-2009, 07:14 AM   #29
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If one uses AGI and not (AGI+tax_deferred_contributions_to_[401k,FSA,HSA]), then aren't things inconsistent because later AGI will include taxed_withdrawals_from_401k?

And how do you want to use tax credits in the equation? If one pays foreign tax on investments, one gets a credit. The tax reduced your income and the credit reduced the tax to the IRS. Other tax credits are different. I received some tax credits in 2008 just for being alive.

For 2008, our marginal tax rate was 25% and the effective rate was 8%. I miscalculated how much not working would reduce our tax burden.
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Old 03-29-2009, 09:10 AM   #30
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And how do you want to use tax credits in the equation? If one pays foreign tax on investments, one gets a credit. The tax reduced your income and the credit reduced the tax to the IRS.
I was under the impression that foreign tax reduced your
"take home" income but that when reported on the 1099DIV, it actually gets added back so that your gross reported ordinary dividend includes the foreign tax which is also reported separately as foreign tax.

My "cash flow" records of dividends always seem to differ from the 1099 numbers by the amount of the FTC.
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Old 03-29-2009, 10:16 AM   #31
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Right, I should have the word "take-home" inserted into "reduced your income". My 401(k) contributions reduce my take-home income as well.
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