Taxes & SS - Live and Learn

[pb4uski]

I put Roth conversions as Unearned Income.

+1 that's where it belongs

 

[pb4uski]

I need to look at the calculator again - I didn't see a spot for unearned income, so my 'fix' was to put the conversion as Earned and remove the taxes for SS and Medicare. Thanks for the responses.

That will work, but it's technically incorrect.

 

[Gumby]

For what its worth, the shortcut in this post can help you calculate when you will reach 85% social security taxation and return to your normal tax bracket.

https://www.early-retirement.org/fo...-income-levels-2021-a-106300.html#post2506932

 

[TheWizard]

Re: the IRS tax calculator. If I only have Roth conversions for the year, I would input those under Earned Income and uncheck the Social Security and Medicare tax boxes, correct? (Ie, only Federal income tax withheld doing a conversion, not other taxes?)

No.
Roth conversions are definitely not Earned Income.
They are treated as "Ordinary" income and you will get a 1099-R for the amount converted.

So the Roth conversion adds to your AGI but you have a number of ways to pay your income tax. Many folks prefer NOT to withhold taxes from the amount converted...

 

[Perryinva]

Don’t forget to check your states income tax deductions as well. I screwed up in 2023 because I neglected to realize that a $30k Roth conversion cost me an added $2500 in state tax because it put my taxable income above $95k and this would have been the first year eligible for the age 65 pension deduction. (An added “nice problem to have” added to that, in that months after I did the conversion I won $12k on a random lottery ticket. Lesson learned: no Roth conversion until end of year!.). I doubt the conversion will be worth $2500 unless some stocks I moved for the conversion take off and I save on that. Started SS in 2024, so with no tIRA withdrawals, I will pay $4000 less in Virginia state taxes for 2024 than I did for the same income in 2023. At least until RMDs hit@73.

 

[GaryInCO]

A Roth question I've never been clear on: is the conversion "in place of" your yearly Roth contribution, or is it unrelated? Can you do a Roth conversion AND also put the full $8000 into your Roth?

I'm never sure of my income until my CPA does my taxes. I still have some LLC income, rental income, Income Reduction Act credits, etc so basic tax calculators don't cut it for me. I've never managed to get my taxes done before 4/15 so I just have to guess on my income level. If anyone knows of a better calculator I'd like to hear about it. Can TurboTax handle all of that?

 

[SevenUp]

A Roth question I've never been clear on: is the conversion "in place of" your yearly Roth contribution, or is it unrelated? Can you do a Roth conversion AND also put the full $8000 into your Roth?

Unrelated and yes.

I'm never sure of my income until my CPA does my taxes. I still have some LLC income, rental income, Income Reduction Act credits, etc so basic tax calculators don't cut it for me. I've never managed to get my taxes done before 4/15 so I just have to guess on my income level. If anyone knows of a better calculator I'd like to hear about it. Can TurboTax handle all of that?

Yes, unless there is more to the situation, TT can handle all of that.

"Not calculating depreciation" might be a reason none of the free Tax estimation tools described there could automatically handle your situation. Otherwise, the better ones (for you, "better" = "includes the income, tax, and credit items relevant to your return") will forecast your 2024 taxes now as accurately as your income estimate.

 

[GaryInCO]

Thanks @SevenUp! Do I need to have the depreciation history from my CPA to calculate it properly?

 

[RunningBum]

Don’t forget to check your states income tax deductions as well. I screwed up in 2023 because I neglected to realize that a $30k Roth conversion cost me an added $2500 in state tax because it put my taxable income above $95k and this would have been the first year eligible for the age 65 pension deduction.

That's just an age 65 deduction, nothing to do with pension, right? I think I've seen this before but it's a good reminder. Thanks for bringing this up.

https://smartasset.com/retirement/v... age deduction,and $87,000 for married filers. seems to explain it. Once I start SS I think my federal AGI may be too high, but from 65 to 70 I will definitely try to use this.

 

[JOBO]

Ss tax

Speaking plainly, the amount of SS subject to federal taxes can be anywhere between 0% and 85% depending on amount and source of income.

In my case 2%,15%, 36% or 51% until RMD then 85%

These states also tax SS Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont

 

[SevenUp]

Thanks @SevenUp! Do I need to have the depreciation history from my CPA to calculate it properly?

That wouldn't hurt, and you should have it from past tax returns.

Depreciation of Rental Property describes what should be done for 2023 and is probably close enough for what you will do for 2024.

If you can look at your previous returns and use them as worked examples (assuming the CPA did them correctly...) to learn how it works, you should be able to make reasonable estimates going forward.