To Retirees, What is your effective Income Tax rate ?

[Dtail]

Currently pay zero federal (state is naturally zero), just due to MAGI management and DGF has her own income which is also zero federal.
Next year one of us will have to pay federal. Haven't figured out this first world problem yet.

[Philliefan33]

Quote:

Originally Posted by RE2Boys Just a nit, not applicable for OP, but do not wish any other readers in future to be misled. The above statement is true probably over 90% of time. But not all 1099R income is not taxable by PA. Early retirement plan distributions may be fully or partially taxable. Annuity income not purchased through a retirement plan IS taxable by PA.

Yes, good catch. I should have said “1099R income with code 7 in box 7 is not taxable, as long as it is not from a life insurance policy or annuity”

That was one of my peeves while doing taxes for seniors...trying to suss out if there was a purchased annuity.

[Splash]

Effective tax rate of 3.9% Federal, 4.9% WI.

Not drawing SS or pension yet.
Managing income for ACA.
Roth Conversions as % of taxable income = 79% for Fed, 75% for WI.

[RetireAge50]

2018 was our first full year of retirement. We paid 1.9% of AGI federal taxes. Our last dollar was taxed at 10%. The next dollar would have been taxed at 24.5%

[scrabbler1]

I turned 56 earlier this year, so I am living on investment income only in the 10 years I have been retired. Much of it is either lower-taxed stock fund dividends, LTCGs, and tax-free muni bond dividends, so my average tax rate is in the 3%-5% range, each for federal and state. It was 5% for each in 2018 because of a large, year-end LTCG distribution.

[HI Bill]

If you have both taxable and tax-deferred investments, depending on your total spend, you can be at much less than 11%. For example, let’s say you’re not taking SS, want to spend $100K annually, and have both taxable and tax-deferred investments.

1) Take $50K from taxable account, of which 25% are LTCGs ($12.5K)
2) Take $50K from IRA, which is 100% taxable ($50K)
3) Use the standard deduction (MFJ) for the IRA distribution (-$24.4K) if under 65.

• IRA distributions less standard deduction (MFJ) = $50K-$24.4K = $25.6K.
• Taxable portion of taxable account distribution: 0.25x$50K=$12.5k.
• Adjusted gross income = $25.6K + $12.5K=$38.1K.

Since you're Taxable Income is under $78,750, your LTCGs are not taxable (0% bracket)....meaning that only $25.6K is taxable. So, you'd pay 10% on this: $2,560. So, effective tax rate is 2.6% (I know, I shouldn't be counting previously taxed in this, but I'm calculating the tax rate on the total 'replacement income').

[Offgrid Organic Farmer]

Quote:

Originally Posted by cyber888 Assuming you live in a State where Social Security is only partially taxed or not taxed, and you are living on an income of $50,000 - $60,000 a year, how much total Income Tax yearly ?

I am not old enough to draw SS, yet.

My pension falls below the threshold for paying income taxes. Most years my other streams on income also have high deductions. So I am among the 47% of US citizens who do not pay into Income taxes.

[cyber888]

Quote:

Originally Posted by copyright1997reloaded Additional Detail: 1099R Income $30,000.00 Social Security $30,000.00 but taxable amount is $13,850. Standard Deduction is $12,000.00 So 30K + 13,850 = $43,850. Minus std deduction of $12,000 = $31,850. Tax on 31850 = $3628 using 2019 tax tables (I think). Tax on additional $1000.00 in 1099R Income: $229, so 22.9% marginal (because some more of the social security becomes taxable)

Thanks for the Details ! Thanks everyone !

[HFWR]

Federal - 6.6% (TP/GI)

No state income tax in TX.

[Souschef]

Federal-12.29% effective tax rate; 22% bracket
Just paid second installment of Federal-$5600

[NYEXPAT]

Yesterday, I just filed for the first time in about 15 years. 0% tax rate and a tax credit of about $1200 left over.

[SecondCor521]

Using pb4uski's numbers, for 2018 my federal income taxes were 0.01%. Yes, one basis point. 2018 state income taxes were 0.62%, or 62 basis points.

I keep my income fairly low because in my case I have a high marginal rate early on due to federal income tax, state income tax, ACA subsidy loss, and FAFSA EFC loss which are all progressive and all in parallel. I calculated about a 28% marginal rate.

In retrospect, I should have been willing to pay up to about a 31% marginal rate. In 2019 I'll probably try to do more Roth conversions and deliberately pay more taxes to get closer to that. Live and learn.

...

As for OP's question, in Idaho, the SS isn't taxed at all. So $30K minus the $13,600 standard deduction would leave $16,400 in taxable income. Running that through the tax tables looks like about $878 in tax, from which you'd be able to subtract a $120 grocery tax credit and add a $10 permanent building fund tax, for net of $768 in state income taxes for 2018.

[Ed B]

In retirement our effective federal income rate is ~6.5% . No state income tax in Texas. That is on about 80k gross, married filing joint, standard deduction with one minor child living at home (child tax credit).

[RxMan]

This thread is helpful for those of us still in the retirement planning stage. I’ve been trying to calculate rough estimates on what taxes and healthcare will cost as a percentage of our future monthly retirement budget. My initial calculations were subtracting 15% for taxes and healthcare costs. I may bump that up to play it safe for my healthcare cost estimates but I’m a little less apprehensive about the tax side of the estimates after reading this thread.

[bingybear]

Not sure you can make much out of just tax rate data. Some are trying to minimize taxes today and others are doing roth conversions up a few tax brackets.

[RE2Boys]

Effective rate = 0.41% of AGI

Marginal Rate = 27% (just a tiny bit over the top of the 12% bracket driving cap gains into 15% + 22% ordinary income

Helps to have two sons in college so have $5K in education credits. Very temporary situation as 2019 is last year of education credit for older son, 2020 last year for younger son education credit

[CardsFan]

Quote:

Originally Posted by RxMan This thread is helpful for those of us still in the retirement planning stage. I’ve been trying to calculate rough estimates on what taxes and healthcare will cost as a percentage of our future monthly retirement budget. My initial calculations were subtracting 15% for taxes and healthcare costs. I may bump that up to play it safe for my healthcare cost estimates but I’m a little less apprehensive about the tax side of the estimates after reading this thread.

Quote:

Originally Posted by bingybear Not sure you can make much out of just tax rate data. Some are trying to minimize taxes today and others are doing roth conversions up a few tax brackets.

Both points are pertinent. If you have both after tax and tax deferred accounts, and no pension, you can pretty much pick what tax rate you want to pay, until you hit 70 (for SS) and 70.5 (for IRA/401k).

While our current Fed tax is 5.8%, and in the 12% bracket, when the tax torpedo hits, we will be solidly in the 22% (or even the 24% bracket), and the effective rate will be around 14%.

When one of us departs, the other is likely to get in to the 32% bracket, with an effective rate around 18%.

[bingybear]

Quote:

Originally Posted by CardsFan Both points are pertinent. If you have both after tax and tax deferred accounts, and no pension, you can pretty much pick what tax rate you want to pay, until you hit 70 (for SS) and 70.5 (for IRA/401k). While our current Fed tax is 5.8%, and in the 12% bracket, when the tax torpedo hits, we will be solidly in the 22% (or even the 24% bracket), and the effective rate will be around 14%. When one of us departs, the other is likely to get in to the 32% bracket, with an effective rate around 18%.

I agree that both goal are valid.. and other goal may be too. The point I was trying to make is that you need to understand the taxes and why they are what they are. It is easy to do roth conversions to the top of the 15% bracket (in the past) and pay a 3% or less in taxes. Now if you go after the tax torpedo and convert to the top of the 24% bracket (with qualified dividends above the conversion... maybe 20% tax or more?

One needs more than just people's resulting tax for planning as the rates alone could be misleading.

[CardsFan]

Quote:

Originally Posted by bingybear I agree that both goal are valid.. and other goal may be too. The point I was trying to make is that you need to understand the taxes and why they are what they are. It is easy to do roth conversions to the top of the 15% bracket (in the past) and pay a 3% or less in taxes. Now if you go after the tax torpedo and convert to the top of the 24% bracket (with qualified dividends above the conversion... maybe 20% tax or more? One needs more than just people's resulting tax for planning as the rates alone could be misleading.

I think we are in agreement. Everyone has a different situation. It is helpful to see the range you can pay, but you must look at your own situation and make decisions that meet your needs.

FWIW, when working our effective tax rate was 14% to 16%. So, I may not like it, but being in the same range when we hit RMD's is not a game changer.

[RobbieB]

I just started drawing down the IRA, not for Roth conversions, just to blow that dough.