Basic Question Re IRA taxation

[LXEX55]

I am 64 years old, and probably will not touch my IRA money until one year from now. Since I do not have a ROTH IRA, I know that my withdrawals will be taxed as regular income. I am trying to figure out approx what rate that would be. I found a site that details tax rates based on income (under $38,700 taxed at $952 plus 12%) ($38,701-$82,500 taxed at $4,453 plus 22% over the amount above $38,700). Is this the table that I should use when figuring out approx how much tax I will be hit with when I eventually make the withdrawals? Sorry for the longwinded question, as you can see, I am not a numbers man. Thanks very much.

 

[SumDay]

That looks right, but don't forget your standard (or itemized) deduction.

https://www.forbes.com/sites/kellyp...dard-deduction-amounts-and-more/#24757c7a2081

https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/

How do you do your taxes? Have your tax person give you a guesstimate, or search Google for 2019 Federal Tax Calculators for a second opinion. I'm finding a great deal of discrepancy from one to the next so am aiming a little high to be safe.

 

[zinger1457]

Yes, those tables will work for a single filer, it would be different if married/joint. There are several online tax calculators that are useful and will give you an accurate estimate of taxes owed, this one is from HR Block.


https://www.hrblock.com/tax-calculator/#/en/te/aboutYou

 

[walkinwood]

I second the suggestion to use a tax program - online or on your desktop. The law is complex and interactions between items are as clear as mud.


Your investment dividends & capital gains also matter. When SS kicks in, there are those variables in play too.

 

[COZICAN]

Does the standard deduction mean that if I withdraw $80,000 I only have to pay taxes on $56,000 after the $24,000 standard deduction for married filing jointly?

 

[SumDay]

I second the suggestion to use a tax program - online or on your desktop. The law is complex and interactions between items are as clear as mud.


Your investment dividends & capital gains also matter. When SS kicks in, there are those variables in play too.

+1 If you don't do your own taxes, have your tax person help you.

 

[Jerry1]

Does the standard deduction mean that if I withdraw $80,000 I only have to pay taxes on $56,000 after the $24,000 standard deduction for married filing jointly?

Yes. Assuming no other types of income or any deductions beyond the $24,000.

 

[pb4uski]

And the standard deduction is actually $24,400 for a couple under age 65 for 2019, but you're on the right track.

 

[Sunset]

OP - Sounds like you file single.
Why are you not withdrawing from your IRA at this time ?

 

[CindyBlue]

And the standard deduction is actually $24,400 for a couple under age 65 for 2019, but you're on the right track.

Do you know what the standard deduction is for a couple where one is over 65 and one is under 65?

 

[Crabby Mike]

Do you know what the standard deduction is for a couple where one is over 65 and one is under 65?

For 2019, it will be $12,200 for each individual under 65, plus an additional $1,300 for each over 65 or blind. So for a "mixed" couple as you describe, it would be $25,700.

 

[pb4uski]

Do you know what the standard deduction is for a couple where one is over 65 and one is under 65?

.

The standard deduction amounts will increase to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly and surviving spouses. For 2019, the additional standard deduction amount for the aged or the blind is $1,300.

 

[Katsmeow]

I have found this calculator to be helpful. This is for 2019 so for 2020 there could be some differences as the brackets change slightly each year.

https://www.mortgagecalculator.org/calcs/1040-calculator.php

 

[COZICAN]

I have found this calculator to be helpful. This is for 2019 so for 2020 there could be some differences as the brackets change slightly each year.

https://www.mortgagecalculator.org/calcs/1040-calculator.php

Nice calculator. Thanks!

 

[LXEX55]

OP - Sounds like you file single.
Why are you not withdrawing from your IRA at this time ?

No, I am not single, married. Not withdrwawing because I don't need the money. That is also why I waited on SS. Am considering waiting to collect SS at 70 and using IRA money to live off. But...that is another thread that I started about two weeks ago. Got some excellent answers.

 

[pb4uski]

Let's assume for the moment that you have no income other than tIRA withdrawals and you take the standard deduction.

Your first $12,200 would not be taxed since it will be covered by the standard deduction.

The next $9,700 will be taxed at 10%, then next $29,775 at 12% and the next $42,925 at 22%.

So if you had no other income and took out $51,675 your federal tax would be $4,543 or 8.8% of the amount withdrawn. When you deferred that income your marginal rate was probably 25% or more, so you have saved $8,371... congratulations!

Many people are in low tax brackets from early retirement until pensions and or SS start. That is an ideal time to do tIRA withdrawals (even if you just put the proceeds in a taxable account) or to do Roth conversions.

 

[kaneohe]

No, I am not single, married. ...............

Then it sounds like you are looking at the wrong column in the table. Use the mortgage calculator link shown previously to access the tax calculator.
The tax rate schedule is also shown if you scroll down.

Probably best to use the tax calculator to check any assumptions you make.....
a little big of knowledge .........

 

[CindyBlue]

For 2019, it will be $12,200 for each individual under 65, plus an additional $1,300 for each over 65 or blind. So for a "mixed" couple as you describe, it would be $25,700.

Thank you!

 

[CindyBlue]

Let's assume for the moment that you have no income other than tIRA withdrawals and you take the standard deduction.

Your first $12,200 would not be taxed since it will be covered by the standard deduction.

The next $9,700 will be taxed at 10%, then next $29,775 at 12% and the next $42,925 at 22%.

So if you had no other income and took out $51,675 your federal tax would be $4,543 or 8.8% of the amount withdrawn. When you deferred that income your marginal rate was probably 25% or more, so you have saved $8,371... congratulations!

Many people are in low tax brackets from early retirement until pensions and or SS start. That is an ideal time to do tIRA withdrawals (even if you just put the proceeds in a taxable account) or to do Roth conversions.

Hmm...You've got me to thinking. I will have a year (14 months, actually) of income from only my pension, before I finally get to SS. So I should be using money from my 403b instead of my cash savings to add to my budget for my year of pension income, then, because that year will be the year I have the least income, so my tax bite will be the lowest?

 

[Go-NoGo]

Originally Posted by Katsmeow View Post
I have found this calculator to be helpful. This is for 2019 so for 2020 there could be some differences as the brackets change slightly each year.

https://www.mortgagecalculator.org/c...calculator.php
Nice calculator. Thanks!

+1 Thanks - this is a nice tax calculator!

 

[pb4uski]

Hmm...You've got me to thinking. I will have a year (14 months, actually) of income from only my pension, before I finally get to SS. So I should be using money from my 403b instead of my cash savings to add to my budget for my year of pension income, then, because that year will be the year I have the least income, so my tax bite will be the lowest?

You got it.

 

[pb4uski]

I forgot to specify that the below is for a single... for a married couple filing jointly, just double the amounts below.

Let's assume for the moment that you have no income other than tIRA withdrawals and you take the standard deduction.

Your first $12,200 would not be taxed since it will be covered by the standard deduction.

The next $9,700 will be taxed at 10%, then next $29,775 at 12% and the next $42,925 at 22%.

So if you had no other income and took out $51,675 your federal tax would be $4,543 or 8.8% of the amount withdrawn. When you deferred that income your marginal rate was probably 25% or more, so you have saved $8,371... congratulations!

Many people are in low tax brackets from early retirement until pensions and or SS start. That is an ideal time to do tIRA withdrawals (even if you just put the proceeds in a taxable account) or to do Roth conversions.