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Tax Bracket vs. Effective rate
03-17-2009, 07:16 AM
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#1
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Recycles dryer sheets
Join Date: Jan 2009
Posts: 255
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Tax Bracket vs. Effective rate
My tax bracket is 25%. My effective rate is 15%. Wondering how others are stacking up?
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03-17-2009, 07:22 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Is that effective rate relative to AGI or relative to all income, whether taxable or not?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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03-17-2009, 07:28 AM
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#3
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Recycles dryer sheets
Join Date: May 2007
Location: Belmont
Posts: 160
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For me, marginal federal rate is 28%, but add 4% for Michigan, and 7.5% for earned income. Totals 39.5% - Wow, hardly worth w*rking!
__________________
Work is the curse of the partying class!
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03-17-2009, 08:04 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Sep 2002
Posts: 1,178
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Marginal Rate was 15%. Effective rate was 4.6%. Much of my military pay is tax free plus we sheltered everyting we could in 401K and wife's S-Corp retirement plan. Throw in some tax loss selling and depreciation on two rentals and there you have it. Oh yeah 2 dependents under 17.
Tomcat98
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03-17-2009, 08:06 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
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Federal is 15% and 6.6%. With state income tax, effective is 9.4%. With property tax, effective is 25%.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
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03-17-2009, 08:21 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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I won't do 2008 taxes until later this year, but for 2007, marginal rate was 33% and effective rate was about 15%.
For me, the marginal rate answers this question: "What would my 401(k) contributions be taxed at if I didn't make them?"
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03-17-2009, 08:27 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
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15% Highest Tax Bracket - 10.4% Actual of Taxable Income. However, that does not tell the WHOLE story as that is the tax rates on TAXABLE income. Taxable income is 60% of TOTAL INCOME (the other 40% of TOTAL INCOME is not taxable). This going to be another "IT DEPENDS" threads!
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Vietnam Veteran, CW4 USA, Retired 1979
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03-17-2009, 08:31 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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According to TurboTax...
Tax bracket = 25%.
Effective rate = 12.43%.
2008 is the first year I had no earned income. I still have enough itemized deductions to use Schedule A. Next year I won't unless I get really generous (charitable contributions) or my property taxes increase dramatically to equal the standard deduction for single filers.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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03-17-2009, 08:32 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by OAG
However, that does not tell the WHOLE story as that is the tax rates on TAXABLE income. Taxable income is 60% of TOTAL INCOME (the other 40% of TOTAL INCOME is not taxable). This going to be another "IT DEPENDS" threads!
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That was my point. First of all, my W-2 income was nearly $20,000 lower than my total income because of 401K and HSA contributions. Second of all, what's left is basically the AGI before other deductions and exemptions.
My federal tax bracket was 25%, but the total tax I paid was 12% of total income, 14.1% of AGI and a little over 17% of taxable income (AGI minus deductions and exemptions).
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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03-17-2009, 08:35 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by freebird5825
Next year I won't unless I get really generous (charitable contributions) or my property taxes increase dramatically to equal the standard deduction for single filers.
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I never get to deduct charitable contributions since I have a small home (i.e. small property tax bill), no state income tax and no mortgage. I've been thinking about putting something like $10,000 into a charitable trust so I can itemize and get a deduction for most of it, then dole out some donations from that while I save up another batch of money for the next time I "reload" this account a few years later. That way, at least, I'd be able to write off most of my giving, even if in a roundabout way.
But right now I can't part with $10,000 of my emergency fund. Not in this economy and job market.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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03-17-2009, 08:44 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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03-17-2009, 09:23 AM
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#12
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,714
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Quote:
Originally Posted by ziggy29
That was my point. First of all, my W-2 income was nearly $20,000 lower than my total income because of 401K and HSA contributions. Second of all, what's left is basically the AGI before other deductions and exemptions.
My federal tax bracket was 25%, but the total tax I paid was 12% of total income, 14.1% of AGI and a little over 17% of taxable income (AGI minus deductions and exemptions).
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You still have a tax liability on the 401K and HSA, you are just not including it in your current calculations.
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03-17-2009, 09:30 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by MichaelB
You still have a tax liability on the 401K and HSA, you are just not including it in your current calculations.
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On the 401K, yes, but one can't calculate it without knowing future tax rates and income levels when I withdraw it.
On the HSA, there's no tax liability if you use it for its intended purpose. If you withdraw it for non-medical purposes after age 65, see the 401K disclaimer.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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03-17-2009, 09:33 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 1,250
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Tax bracket officially 25%, but 2008 Effective Tax Rate was 3.08% - it is GOOD to be a grad student who maxes out TSP/def comp contributions!
(this does not include the tax exempt housing & food $$$ from military)
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Make no mistake, my friend, it takes more than money to make men rich. - A. P. Gouthey
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03-17-2009, 09:56 AM
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#15
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Moderator Emeritus
Join Date: May 2007
Posts: 12,901
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for 2008, marginal tax rate = 28%
Effective tax rate = 19.5% of taxable income, 16.4% of AGI, 13.7% of total gross income.
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03-17-2009, 10:35 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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My tax rate is driven by the AMT - 26%
My effective tax rates averages somewhere between 15% (capital gains) and 26% (AMT) depending on how much of my annual income is capital gains.
Tax tables? What tax tables!
Audrey
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03-17-2009, 10:58 AM
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#17
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,714
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Quote:
Originally Posted by ziggy29
On the 401K, yes, but one can't calculate it without knowing future tax rates and income levels when I withdraw it.
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Sounds like one of those "mark to model" excuses to me. Lehman, Bear, AIG, ziggy29... Still a tax liability.
Quote:
On the HSA, there's no tax liability if you use it for its intended purpose.
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Right.
Quote:
If you withdraw it for non-medical purposes after age 65, see the 401K disclaimer.
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See response above...
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03-17-2009, 12:06 PM
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#18
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Recycles dryer sheets
Join Date: Jan 2009
Posts: 255
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Ziggy
My AGI is actually about $26K higher than my taxable income. I was simply concentrating on taxable income and only on the Federal level. Ironically enough it seems that my SIRED income will be almost exactly what this years taxable income is. I figure my exemptions will remain the same and possibly better with a $3000 health care deduction.
Since DW has been handling the taxes I never realized what a disparity there is between the bracket and effective tax. This means i've miscalculated by about 10K to the plus side during retirement.
Additionally it seems that I'm not going to jail for all the years DW has been at the controls. I'm also not surprised at how adept everyone here is at avoiding the taxman.
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03-17-2009, 02:02 PM
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#19
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Recycles dryer sheets
Join Date: Aug 2003
Posts: 481
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Federal Tax Bracket: 28%
Actual marginal Federal income tax rate: 37.5% (including AMT and phase-outs)
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03-17-2009, 02:09 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Well, thanks for not saying "Madoff," anyway...
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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