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Old 07-18-2020, 02:04 PM   #61
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Close here but no cigar, .65% Lots of LTCG, QD, , SS, and Roth conversions, lost foreign tax credit. Both over 65.
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Old 07-18-2020, 02:24 PM   #62
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Seven and a half percent.
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Old 07-18-2020, 02:51 PM   #63
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16% 😭😭😭😭
Iím doing it wrong!
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Old 07-18-2020, 03:01 PM   #64
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How does one calculate "effective Federal income tax rate"? Does one exclude all their non-taxed income that went to places such as 401(k), HSA, health insurance, college tuition? I don't use TurboTax, but I know it has a bogus way of calculating the effective tax rate.
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Old 07-18-2020, 03:27 PM   #65
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16% 😭😭😭😭
Iím doing it wrong!
Not as wrong as me!

17.79%
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Old 07-18-2020, 03:34 PM   #66
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How does one calculate "effective Federal income tax rate"? Does one exclude all their non-taxed income that went to places such as 401(k), HSA, health insurance, college tuition? I don't use TurboTax, but I know it has a bogus way of calculating the effective tax rate.
I do use Turbo Tax and I don't know what's bogus;

Adjusted Gross Income $ 139,524.00
Taxable Income $ 113,637.00
Total Tax $ 10,500.00
Total Payments/Credits $ 10,000.00
Payment Due $ 500.00
Effective Tax Rate 7.53%
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Old 07-18-2020, 03:49 PM   #67
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I do use Turbo Tax and I don't know what's bogus;

Adjusted Gross Income $ 139,522.00
For one thing, AGI does not include one's $26K to their 401(k), their $8K to their HSA, their $5K in health insurance premiums, wife's 401(k) which were paid out of income. Many people have a lot of untaxed income that doesn't show up in AGI and you are very likely one of them.

Our income is about yours if we add back 401(k), but using the TT algorithm, our effective Federal income tax rate is under 2% and even less if we include all our income.
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Old 07-18-2020, 04:11 PM   #68
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I don't think so.

When you run your Cost-Basis down, then you must also make improvements to bring your Cost-Basis back up again.

I have used depreciation on rental real estate for years, and I have never seen any bad effect from it.

When you sell one property you roll the equity into a different property, and keep depreciating.
Tell that to the folks in this thread trying to figure out how to get out of rental properties.

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Old 07-18-2020, 04:26 PM   #69
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So TT bases the calc on AGI, what's bogus about that?
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Old 07-18-2020, 05:18 PM   #70
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While it is perfectly reasonable to use AGI in the denominator, does anyone here ever use AGI + muni bond interest instead? It wouldn't change things much for me in recent years, maybe lower the ETR by one or two tenths of a point. But years ago, when I had more of that income, and the tax rates were higher, and I was in a higher tax bracket, the spread was usually between half a percent and 1 percent.
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Old 07-18-2020, 05:43 PM   #71
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So TT bases the calc on AGI, what's bogus about that?
It's OK, but call it "Effective Federal adjusted gross income tax rates." A good chunk of our income does not appear in AGI at all by design and is thus not taxed.

Or another way to think about this: If a taxpayer doesn't have a lot of income excluded from income tax, then maybe the taxpayer should see if they can have a lot of income excluded from income tax.
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Old 07-18-2020, 05:58 PM   #72
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Old 07-18-2020, 06:50 PM   #73
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Yeah, I started drawing the IRA down at age 63.
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Old 07-19-2020, 05:23 AM   #74
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So I assume this thread of very low FIT percentages is based entirely on the vast majority or all income being LTCGs and qualified dividends? IE : no one has pensions that automatically propel them in to a higher bracket that eliminates any 0% taxes on those LTCGs & dividends? It had/has never occurred to me that anyone can have almost $140k in income and only pay $10.5k in fed taxes!! I assume of course that no one is bragging low numbers, without stating income, for a specific year because they have everything in a Roth or non retirement accounts. Paying zero taxes because earnings are below the standard deduction while living off of after tax money is good planning but no feat of tax cleverness.
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Old 07-19-2020, 05:34 AM   #75
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It's OK, but call it "Effective Federal adjusted gross income tax rates." A good chunk of our income does not appear in AGI at all by design and is thus not taxed.

Or another way to think about this: If a taxpayer doesn't have a lot of income excluded from income tax, then maybe the taxpayer should see if they can have a lot of income excluded from income tax.


Not everyoneís health insurance premiums are excluded. If your insurance is provided by your employer, it probably is because itís paid mostly by the employer. I pay my own premiums and can only deduct the premiums if all medical expenses are over 7.5% of my income and all deductions over the standard. Mine were and I itemized, but most people donít.
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Old 07-19-2020, 07:21 AM   #76
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Hmm, if you pull fully tax free funds from a Roth, does it get included as gross income and then deducted as tax free or tou simply don’t include it in the 1040 at all. I have not yet pulled any Roth monies out.

Never mind, you still get a 1099R and it has to be reported as tax free income.
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Old 07-19-2020, 08:36 AM   #77
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So I assume this thread of very low FIT percentages is based entirely on the vast majority or all income being LTCGs and qualified dividends? IE : no one has pensions that automatically propel them in to a higher bracket that eliminates any 0% taxes on those LTCGs & dividends? It had/has never occurred to me that anyone can have almost $140k in income and only pay $10.5k in fed taxes!! I assume of course that no one is bragging low numbers, without stating income, for a specific year because they have everything in a Roth or non retirement accounts. Paying zero taxes because earnings are below the standard deduction while living off of after tax money is good planning but no feat of tax cleverness.

In my case, yes, LTCGs, dividends and some interest. No, I do not have any pension income, nor SS, probably waiting 5 more years for that at 70.
I wonder what we can call income,
I sold $126k of VTSAX, $37k of that was LTCGs. What is the income $126k or $37k, are we basing income on what we spent? In my case I reinvested about $90k of the VTSAX withdrawal. My AGI was $55,300. But in the process of generating that $55,300, I had $154,300 go through the sieve.
So how are we defining income?
It's complicated.
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Old 07-19-2020, 08:53 AM   #78
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10.41 effective; 32% marginal. I was quite pleased.
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Old 07-19-2020, 08:58 AM   #79
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42% eff tax rate
Are you sure that isn't a combined Federal and State effective (or even a combined marginal) rate?

Fed rate tops out at 37% marginal (plus medicare surtax)...maybe self employment taxes bump it up a bit on the first 100K of income, but that income is taxed at a much lower marginal rate so even if you pay both sides it is not 42%.
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Old 07-19-2020, 09:03 AM   #80
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Tell that to the folks in this thread trying to figure out how to get out of rental properties.
When we at last got rid of our final rental property, we refinanced it, to extract all equity, two years before putting it up for sale.

That allowed us to walk away with that equity in cash and tax-free.

Little did we know that after 19 years of retirement, we were going to start the process again.

When we had rentals before [1985 to 2009] I had a high wage income that needed the tax sheltering. Today I am on a pension that is exempted from income taxes, so I no longer require the tax shelter.
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