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View Poll Results: What was your EFFECTIVE tax rate for 2015?
Less than 10% 32 28.57%
Between 10% and 20% 47 41.96%
Between 20% and 25% 13 11.61%
Over 25% 20 17.86%
Voters: 112. You may not vote on this poll

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Old 03-06-2016, 07:37 AM   #21
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Turbo tax says 24% ..

AGI / fed income tax = 32%
Taxable Income / federal income tax = 34%
Taxable Income / fed + state + local = 39% <-- this is what I consider effective tax rate.

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Old 03-06-2016, 09:01 AM   #22
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15% marginal tax rate.

Using Sengsational's method (which includes Premium Tax Credits) I get -21%.
TT also reports -21%

Using Frayne's method I get 2%.

This is my first *full* year of retirement so the first one that my income is low, we qualify for premium tax credits, etc... Prior to retirement it was more in the 12-13% range.

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Old 03-06-2016, 09:57 AM   #23
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Originally Posted by audreyh1 View Post
I thought that was how TT calculated it.
Based on a reverse calculation of my TurboTax summary sheets, it's Total Tax (1040 Line 63) / Income (1040 Line 22/37/38).

I'm not sure if TT's using Total Income or Adjusted Gross Income because my Line 22 and 37/38 are the same.

I was able to file as HoH this year so Federal Effective Tax Rate is 10.6% and State Effective Tax Rate is 1.9%. Marginal Tax Rates are 25% Federal and 6% State. Both would've been significantly higher if I had filed as single. I'm near the border of 15/25 for Federal HoH. Had some unplanned expenses so I wasn't able to increase my 457 contributions to get me down to 15%.
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Old 03-06-2016, 10:22 AM   #24
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per TT 21.92%.
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Old 03-06-2016, 12:06 PM   #25
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Using numbers that TT gave me on the summary, my ETR was 16.32%.

It's great to see how non-taxable income does not affect this number.

The effective state rate in Texas is 0% for all of us.
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Old 03-06-2016, 12:30 PM   #26
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TT says 15.6% which is calculated on gross AGI.

Using taxable income (1040 line 43) it is 17%.
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Old 03-06-2016, 01:16 PM   #27
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Fed income tax/AGI 18%
Fed income tax/TI 21%
Fed + state income tax/TI 26%

I'm single, not yet retired, and slightly into the 28% marginal tax bracket by a few thousand. In retirement, the effective tax rate should decrease 2-3% or not that much since income will be pension, 401k, and SS.
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Old 03-06-2016, 01:42 PM   #28
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Originally Posted by Lakedog View Post
Using your definition (Line 43/Line 63), mine was 15.6%. Being single with a pension is not so good with respect to fed taxes. At least no state taxes for me.
Actually, it is good. DW and I are impacted big time by the marriage penalty and are paying more taxes filing MFJ than we would as two singles.

Our retirement incomes are similar.
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Old 03-06-2016, 01:58 PM   #29
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This year it was much lower at 19.5% on Fed Return.
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Old 03-06-2016, 03:00 PM   #30
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Originally Posted by frayne View Post
I think we need some standardization as many are doing it differently. My understanding is your effective rate is your tax liability (actual tax due) divided by taxable income (income after standard/itemized deduction and exemptions,etc.) not AGI. To be even more specific Form 1040 line 63 divided by line 43. For the sake of simplicity could we keep it just on the federal returns ?
My Form 1040 line 63 divided by line 43 was 17%. I was employed for the 1st 3 months of 2015.
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Old 03-06-2016, 03:44 PM   #31
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Haven't done my 2015 tax, I pretty sure we're looking at a 30% + effective tax rate for this past year.last year it was 32% thanks to stock options exercises and this year should be similar. Next year maybe be the same, but after that it'll be mostly dividend income and should be dramatically lower.

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Old 03-06-2016, 05:27 PM   #32
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Well, Turbotax reports it as 12.28%, but by Frayne's 1040 line 63/line 43, I get 14.47%.

Most of our income is taxed at long-term capital gains rates, and we are in the middle of the 15% tax bracket for ordinary income. So even though we pay AMT on that ordinary income and are subject to NIIT, our overall tax rate is low. Fairly typical of a retiree living off of investments, as long as they aren't withdrawing a large amount out of an IRA.

Frayne's calc kicks out several items that lower my taxable income, such as the HSA contributions, exemptions, and deductions. That doesn't seem right. I would think it more appropriate to use line 22 - total income.

If I divide line 63 (tax owed) by my total taxable income (line 22), I get 13.29%.

If I add back in my tax-exempt income (which doesn't appear on line 22), I get 12.95%, which is a little closer to what Turbotax is reporting, but still off, so I don't know what the heck TT Is doing! Fantasy land!

Well anyway - it dropped 2% compared to last year, which is a good thing!
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
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Old 03-06-2016, 06:19 PM   #33
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I like the TT method better. Seems like an "effective tax rate" should be all the tax you pay divided by all your income. You start subtracting out exemptions and deductions from your actual income, and it seems to me it's not really a bottom line "effective" number any more.
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Old 03-06-2016, 06:33 PM   #34
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The OP expresses the effective tax rate as stated on the Turbotax summary. For non Turbotax users this would basically be your FEDERAL tax only effective rate after all additions, credits and deductions are taken.

Our joint federal filing tax rate puts our combined gross income in the 25% rate level.

Turbotax lists our federal Effective tax rate at 11.09%.

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Old 03-07-2016, 06:31 AM   #35
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For 2015...

Fed Marginal Rate 25% (just barely )
State Marginal Rate 5.75%

Fed AGI / fed income tax = 10.4%
Fed TI / federal income tax = 13%
Fed TI / fed + state = 20% (See note)

Note: State TI significantly higher than Fed TI. Significant Dividends from VWIUX on State Taxes this year. Not much of that fund is in muni bonds from my State.
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Old 03-07-2016, 07:48 AM   #36
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Haven't finished 2015 taxes yet, but last year our effective rate was 15 or 16%. I expect it to be about the same this year.
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Old 03-07-2016, 08:12 AM   #37
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Weird--HR Block's software didn't spit this out on page one like T.Tax (but they were the ones with Amazon rebate this year.)

Answered based on basis of AGI and line 63 (which overstates effective rate for those of us still working, due to retirement plans and employer health insurance).

Going to be nice, on one level, when we retire and don't have to check the "over" box. Then again, it is (on balance) a nice problem to have.
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Old 03-07-2016, 08:59 AM   #38
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9.9% per TT, no state to factor in.
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Old 03-07-2016, 09:22 AM   #39
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So I get carried away with these calculations...

fed tax/taxable income: 17.8%
fed tax/agi: 12.5%
fed tax/all income (includes non-taxable income and retirement contributions): 11.0%

total income taxes (fed + state) /taxable income: 27.0%
total income taxes / agi: 19.0%
total income taxes / all income: 16.6%

all taxes (fed + state + ss + medicare + property) / taxable income: 37.9%
all taxes/agi: 26.6%
all taxes/all income: 23.4%
Current target FIRE date: June 2017 or +50K to the portfolio, whichever comes first
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Old 03-15-2016, 08:28 PM   #40
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TurboTax says 27%. There are worse problems to have.

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