Composition of taxed RMD checks

[Fleur58]

Could someone please comment on the tax deductions for an actual example Trad IRA RMD subject to Federal and state taxes? Say 40Km how much would I have to pay in taxes?. Specifically what line items are there for taxes, e.g. SS, Medicare, other Federal?

Just how bad are the taxes? My state (MD) charges 7.75% for state and local taxes on Roth Conversions and RMD.

I would likely be in the 22% bracket when I take RMD because of SS and a small pension.

I am struggling to find a tax advisor who doesn't want me to liquidate my Fidelity trad IRA and transfer my assets to another investment house so they can choose and manage the investments.

 

[braumeister]

You might start with a look at this thread from last year:
https://www.early-retirement.org/forums/f28/questions-about-rmd-and-ss-deductions-112698.html#post2723456

 

[Souschef]

Run, do not walk away from anyone like that. If you use TT or a similar tax program, it works it out for you.

In my case, I have SS, RMD and pension
On your 1040,
line 4 is your RMD, line 4b is your RMD less QCD

line 5 is your pension.
line 6 is Social Security line 6b depends on your income, it can be zero, 50% or 85% of you SS. In my case it is 85%
You add those 3 lines to interest, dividends, and capital gains
Line 9 is the total income.
You then deduct the standard deduction to get your approximate taxable income.
I am not mentioning qualified dividends or capital gains tax rate to keep this simple.
Any good tax program will work out the details.
Hope this helps.

 

[PaunchyPirate]

I find this tool to be helpful in helping me visualize how much tax I will pay for regular income and capital gains.

It does not include state taxes and it does not factor in the special way SS is taxed. But it may be helpful to you.

https://engaging-data.com/tax-brackets/

 

[Accidental Retiree]

I use this calculator to run what-if scenarios. It includes state taxes.

https://www.irscalculators.com/tax-calculator

 

[PaunchyPirate]

I use this calculator to run what-if scenarios. It includes state taxes.

https://www.irscalculators.com/tax-calculator

Great calculator. I had never seen this one before. Much better than the one I suggests. I've bookmarked it. Thanks for sharing this.

Edited to add: Although I don't think it calculated my Pennsylvania taxes properly. PA doesn't tax withdrawals from IRAs. And the tool seems to add those in to the State income. Oh well. It's another tool that will be helpful in some instances.

Adding more: Although, it does provide a place where I can back out any state income that I don't want it to include. So I can use that to back out the IRA income, if I wanted to.

 

[Accidental Retiree]

Great calculator. I had never seen this one before. Much better than the one I suggests. I've bookmarked it. Thanks for sharing this.

Edited to add: Although I don't think it calculated my Pennsylvania taxes properly. PA doesn't tax withdrawals from IRAs. And the tool seems to add those in to the State income. Oh well. It's another tool that will be helpful in some instances.

Adding more: Although, it does provide a place where I can back out any state income that I don't want it to include. So I can use that to back out the IRA income, if I wanted to.

I got this calculator from someone on this site, and I can use it for CA without a problem, but I know I have to be aware of other states’ tax situations.

For example, I’m aware Georgia has a large retirement income exclusion for those over 65 that my friend had to adjust for.

I’d always double-check my numbers against my copy of Turbo Tax, but for someone who doesn’t use TT, this may not be a bad place to start.

 

[braumeister]

I can use it for CA without a problem, but I know I have to be aware of other states’ tax situations.

Good point. All those calculators that figure state taxes have to be used carefully. Just as an example, many pensions, of all types, are fully or partially exempt in some states. Failure to realize that and make an adjustment could lead you to think your taxes in a particular state would be higher than they actually are. There are plenty of other little quirks in state taxation laws that should be considered as well, but can't be accommodated in simple calculators.

 

[Gumby]

I just do my taxes for the year ahead using my state's form 1040 instructions. If I want to see the effect of a planned tIRA withdrawal (or RMD), I do it a second time with that information included and note the difference in the final tax owed line. Yes, it requires a pencil and paper (and maybe an electronic calculator if you're bad at math), as well the ability to look up the form and instructions on the state department of revenue services website, but it's not that hard.

So, barring some otherwise unexpected income, I already know today what I will owe in April 2024.

 

[Fleur58]

Thank you everyone! I'll check out the calculators. You have given me a lot to consider.

 

[RobbieB]

How are you doing your taxes now?

 

[Fleur58]

Turbotax but next year I will begin having them done for me by a tax advisor.

 

[pb4uski]

Turbotax but next year I will begin having them done for me by a tax advisor.

Why would you do that if all you have is SS, a pension and RMDs? It doesn't get much simpler than that. Less than an hour of work with TT.

 

[Gumby]

Why would you do that if all you have is SS, a pension and RMDs? It doesn't get much simpler than that. Less than an hour of work with TT.

Yes, especially since the RMDs will all be ordinary income. The only possible complications I can see are if you have an after-tax basis in your tIRA, if you contributed to your pension such that it is not all taxable, and figuring out the taxable amount of your social security. None of those things is particularly difficult.

 

[pb4uski]

Yes, especially since the RMDs will all be ordinary income. The only possible complications I can see are if you have an after-tax basis in your tIRA, if you contributed to your pension such that it is not all taxable, and figuring out the taxable amount of your social security. None of those things is particularly difficult.

And realistically only one of the three. If the pension was contributory the taxable portion is on the 1099-R and input into TT. TT calculates the taxable amount of SS. So the only potential complication would be if the RMD is only partially taxable, and that is rare and most often it will all be taxable.