Calculating how much of our SS is taxable.

[BrianB]

Working on our taxes this year I found a lost opportunity. We made a small Roth conversion in 2022 based on my expectation that 85% of our SS would be taxable. In the end, only about 25% was taxable so we could have converted significantly more within the same AGI total we targeted.

Is there a way to calculate how much of our SS will be taxable? Every site I found on the web just says "up to 50% for $32k to $44k, and up to 85% above $44k".

I can calculate the provisional income (AGI minus 50% of SS plus non-taxable interest & dividends) but a graph or formula to calculate the taxable amount would be really appreciated!

The deadline for conversions was 12/31 so we're SOL for 2022. I would like to be more accurate in 2023 so we can maximize our conversions without going into the 22% bracket or losing preferential tax rates on dividends and LTCG.

BrianB

 

[Gumby]

You might find this post helpful.

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

 

[BrianB]

Thanks Gumby! I will try this out. I did a search on this forum as well as a general web search, but your post didn't show up.

BrianB

 

[Spock]

I took the 19 line IRS Figuring your taxable benefits worksheet and spreadsheet'd it.
I used the =MIN(x,y) function for spots like "Line 19 Taxable Benefit" = Smaller of line 17 (x) or line 18 .


https://www.irs.gov/publications/p915#en_US_2020_publink1000293181

For one-offs I think I started with this calculator:
https://www.socialsecurityintellige...axable-social-security-benefits-calculator-2/

 

[qwerty3656]

This video does a pretty good job of explaining it:

 

[RunningBum]

Plug your numbers into https://www.irscalculators.com/tax-calculator and it will tell you how much of your SS is taxable along with your total tax.

This may or may not have been a missed opportunity. Start with your actual numbers, and write down your Federal Income Tax at the top of column 2. Then add $1000 to your ordinary income (an extra $1000 converted) and see what the tax is, and subtract the first number. Divide by 1000 and you have your marginal tax rate on that conversion. It's probably going to be larger than you think, because not only did the $1000 get taxed, but you pushed another $500 or $850 of SS into being taxed, for a larger cumulative marginal rate.

 

[Al18]

A larger Roth Conversion will also cause more of your SS to be taxed.

If you completed your taxes on your computer this year, I would copy the tax file and add ‘whatif’ to the end of the filename. Now you can use your tax program to open this new file. Bump up your conversion amount in incremental amounts (say $3k) at a time and log your results in a spreadsheet. After you do a few iterations, you should get a pretty good idea how much you can convert this year without bumping you into the next tax bracket.

Don’t forget to run the proposed new conversion amount thru your state tax program, to see if bump into any deduction limits.

 

[oldtimer]

Also, watch out for capital gains moving from 0% to 15% rate.

 

[Al18]

Saw this online calculator for SS taxation on my YouTube feed yesterday: https://www.covisum.com/resources/taxable-social-security-calculator