Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Tax question
Old 12-16-2006, 07:41 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,412
Re: Tax question

the way it normally works is everyone must check their taxes 2 ways. running it first on the conventional tax system and then on the alternate amt system.

which ever system has you paying more thats the one you must figure. so while everyone gets that 58,000 in deductions on the amt assuming income is below 160,000 or so it normally will bring your taxes due down to a very small amount and so you pay based on the regular syatem most of the time which is higher.
__________________

__________________
mathjak107 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Tax question
Old 12-16-2006, 10:43 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,643
Re: Tax question

Quote:
Originally Posted by mathjak107
the way it normally works is everyone must check their taxes 2 ways. running it first on the conventional tax system and then on the alternate amt system.

which ever system has you paying more thats the one you must figure. so while everyone gets that 58,000 in deductions on the amt assuming income is below 160,000 or so it normally will bring your taxes due down to a very small amount and so you pay based on the regular syatem most of the time which is higher.
DW and I don't do our own taxes because she has partnership income in multiple states. I plan to start doing them when she quits in a year or two and have been trying to figure out likely taxes in the changed circumstances of full ER. We will still have substantial income but people have advised me that it won't be worth doing itemized deductions since the AMT will get us - so we can probably forget keeping track of all that and just run the standard deduction and the AMT. If I understood what the basic principles were I could run some simple scenarios to see if what people say makes sense. Without any general guidelines, I guess the best way to figure it out is to buy a program like Turbo tax and run some stuff through it.
__________________

__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 11:10 AM   #23
Recycles dryer sheets
 
Join Date: Aug 2003
Posts: 474
Re: Tax question

Quote:
Originally Posted by donheff
Can anyone explain all of that if, line 6 is bigger than line 7, then multiply time .8; then x .03, then choose the lesser stuff in simple English so someone can understand the basic principle?
Cut back your itemized deductions by 3% of your AGI over X, but don't take away more than 80% of them.
__________________
bongo2 is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 11:13 AM   #24
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Tax question

Brewer, looks like your question is pretty much answered. If you want me to run any calcs, let me know and I have some tax planning software.

BTW: you think this is bad, just wait until your party is in charge!
__________________
saluki9 is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 02:41 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Tax question

Quote:
Originally Posted by saluki9
Brewer, looks like your question is pretty much answered. If you want me to run any calcs, let me know and I have some tax planning software.

BTW: you think this is bad, just wait until your party is in charge!
So just so I get it: 3% income above roughly 150k for a married couple uis the amount used to reduce one's itemized deductions, up to 80% of one's itemized deductions. That a cortrect statement?

Unlike many others, I don't get wortked up about paying taxes. I know what the tax rates are and (mostly) how I get taxed, and I cannot change it. Plan accordingly, write the checks, and don't spend a lot of time getting worked up over it. Oh yeah: and be thankful you get the chance to make that much.

BTW, if my withholdings for 2007 will be well in excess of 2006's tax, I don't think I have to pay quarterly, right?
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 03:31 PM   #26
Full time employment: Posting here.
shiny's Avatar
 
Join Date: Jun 2005
Posts: 673
Re: Tax question

Quote:
Originally Posted by brewer12345
Unlike many others, I don't get wortked up about paying taxes. I know what the tax rates are and (mostly) how I get taxed, and I cannot change it. Plan accordingly, write the checks, and don't spend a lot of time getting worked up over it. Oh yeah: and be thankful you get the chance to make that much.

BTW, if my withholdings for 2007 will be well in excess of 2006's tax, I don't think I have to pay quarterly, right?
Yea, these are high class problems!

If you pay 110% of what you paid in 2006 in your 2007 withholdings then you don't have to pay quarterly.
__________________
I'm made of atoms, you're made of atoms, and we're all in this together. Ben Lee
shiny is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 03:37 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Tax question

Quote:
Originally Posted by shiny
Yea, these are high class problems!

If you pay 110% of what you paid in 2006 in your 2007 withholdings then you don't have to pay quarterly.
Thanks. I'm still liable for interest on underpayments, right? Just no penalty if you withhold enough.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 03:55 PM   #28
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Re: Tax question

Quote:
Originally Posted by brewer12345
Thanks. I'm still liable for interest on underpayments, right? Just no penalty if you withhold enough.
At your level, if you pay at least 110% of your 2006 tax bill, then no penalties OR interest apply.

This isn't as credible as Retire@40's original legislation, IRS rulings, or private letters, but hey-- you're a trained professional and can probably handle the responsibility of figuring it out for yourself: http://www.irs.gov/pub/irs-pdf/p505.pdf, starting around page 21.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 03:56 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,438
Re: Tax question

I always owe when I file my tax return. Never pay any interest.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 05:31 PM   #30
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Tax question

Quote:
Originally Posted by brewer12345
Thanks. I'm still liable for interest on underpayments, right? Just no penalty if you withhold enough.
No penalties or interest if you pay 110% of last years liability. The IRS doesn't really car whether this is from withholding or from estimates (as long as you don't wait for the 4th quarter to make the majority of payments) I got called out by the IRS because I argued that I didn't know what my bonus would be until the 4th quarter. They turned down my appeal and hit me with a penalty.

Now I don't try to get fancy and just give them their money on time.







__________________
saluki9 is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 05:59 PM   #31
Dryer sheet aficionado
 
Join Date: Jul 2004
Posts: 29
Re: Tax question

The bummer with the "losing itemization tax" and "AMT tax" is that it creates a 22% long-term capital gain tax. I've read articles about this and tested it with my tax returns during the past few years. I do pay 22% on long-term capital gains.

I try to take the perspective that we're paying these higher taxes we made significant incomes. It's a nice problem to have. The government hasn't figured out how to take more than 100% (yet ).

As my Canadian wife says, people in Canada would love to only be paying 45% tax above $200K :P

Mike
__________________
MikeK is offline   Reply With Quote
Re: Tax question
Old 12-16-2006, 06:34 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,412
Re: Tax question

HMMMM I didnt find that with the amt. i paid 15% on the long term capital gains and all other income was subjected to the amt. i guess you can average it out and say your paying more overall because of the amt but i dont see it touching the 15% . im also refering to the point where income has phased out all deductions and your on a flat rate. i never had a situation where i got a partial deduction because we have always been over the limit.
__________________
mathjak107 is offline   Reply With Quote
Re: Tax question
Old 12-17-2006, 11:22 AM   #33
Dryer sheet aficionado
 
Join Date: Jul 2004
Posts: 29
Re: Tax question

Here's a great article explaining the 22%.

http://www.fairmark.com/amt/ltcg.htm

It is basically an issue of the capital gain wiping out the AMT exemption.

I ran a few scenarios with my taxes and found it to be true. I'd add a $10,000 capital gain and my tax would go up by $2,200.

Of course, the AMT is so complicated that the mathematics are dependent on your original income and where you stand within the AMT exemption before the capital gain.

As a CA resident this is an extra frustration because I'm already paying 9.2% state taxes. This makes my short-term capital gains 31.2%.

Mike
__________________

__________________
MikeK is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Another 401K Tax Question With a Twist ShokWaveRider FIRE and Money 7 08-08-2006 10:19 AM
Tax Question: Accelerating deductions for 2005 cube_rat Young Dreamers 24 12-08-2005 09:00 AM
Wait to Age 70 to Collect SS? REWahoo FIRE and Money 77 11-27-2005 03:49 AM
Tax question re moving $$ from one bucket the next. tednvon FIRE and Money 9 10-10-2005 08:57 AM
Bush floats a national sales tax dex FIRE and Money 22 08-17-2004 08:15 AM

 

 
All times are GMT -6. The time now is 10:59 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.