Should I have separate accounts for Deductible and Non-Deductible IRA contributions?

[Fedup]

I looked up at my Vanguard statements and I saw my non-deductible and immediate re characterization. But my Turbotax doesn't keep track of it because I didn't want it to.

 

[audreyh1]

20% or 30%? I thought the QDIV/LTCG rate is 0%, 15%, and 20%, but I'm not a tax CPA. It'll probably change in the next few years too.

Don't worry about that - it's a brief blip as you go from paying 0% to 15% on your cap gains income plus also paying 15% on the additional ordinary income that pushed your total past the 15% tax bracket.

Say you're right at the margin, and you make another hundred that pushes your total income above the 15% tax bracket. The additional ordinary income will be taxed at 15%, but $100 of the cap gains income that was taxed at 0% will now be taxed at 15% as well. That's why folks like to call it a 30% tax margin as ordinary income increases to push more and more of the cap gains income to be taxed at 15%.

If someone can control their cap gains or ordinary income from year to year, they might be able to do something about it. You can't let the tax tail wag the dog however. Just invest sensibly and be aware of tax implications.

Most of my income is long-term cap gains and qualified dividends, and I never worry that "some" of it is being taxed at "30%" if added to the tax on my ordinary income. I'm just delighted that a chunk of it is taxed at 0%.

 

[kaneohe]

Don't worry about that - it's a brief blip as you go from paying 0% to 15% on your cap gains income plus also paying 15% on the additional ordinary income that pushed your total past the 15% tax bracket.
...........................................................
Most of my income is long-term cap gains and qualified dividends, and I never worry that "some" of it is being taxed at "30%" if added to the tax on my ordinary income. I'm just delighted that a chunk of it is taxed at 0%.

My post referred to having significant QDIV/LTCG. If you have significant such income then the 30% bracket can be more than a blip....it is as large as your QDIV/LTCG income or so.

And you are correct that it is a matter of how you think about it.....kind of like SS taxation. You can think about the 30% marginal rate for QDIV/LTCG
or 46+% marginal rate for SS and be miserable, or you can think that some part of QDIV/LTCG i(or SS) is taxed at 0% and the rest of QDIV/LTCG is taxed at 15% or 85% of ordinary income rates for SS. .........or if you have enough other income, you can just blow past those higher rates and not even notice them.

 

[Aiming_4_55]

Don't worry about that - it's a brief blip as you go from paying 0% to 15% on your cap gains income plus also paying 15% on the additional ordinary income that pushed your total past the 15% tax bracket.

Say you're right at the margin, and you make another hundred that pushes your total income above the 15% tax bracket. The additional ordinary income will be taxed at 15%, but $100 of the cap gains income that was taxed at 0% will now be taxed at 15% as well. That's why folks like to call it a 30% tax margin as ordinary income increases to push more and more of the cap gains income to be taxed at 15%.

If someone can control their cap gains or ordinary income from year to year, they might be able to do something about it. You can't let the tax tail wag the dog however. Just invest sensibly and be aware of tax implications.

Most of my income is long-term cap gains and qualified dividends, and I never worry that "some" of it is being taxed at "30%" if added to the tax on my ordinary income. I'm just delighted that a chunk of it is taxed at 0%.

Thanks audreyh1.