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Old 04-20-2018, 09:57 AM   #21
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Pretty easy... select the item and then select Copy image address from the menu... then select the Insert image icon along the top of the reply pane (), then paste the image address in the prompt and hit return.
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Old 04-20-2018, 10:14 AM   #22
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Blockhead here...

I want my friend to be able to play with the numbers balancing the result of increasing IRA withdrawals with selling some of her LTCG stock shares.

Since her total taxable ordinary income is over $38,601 is the total of her LTCG&QualDiv taxed at 15% bracket? That would result in a tax of $3,630 on LTCG&QualDiv which is much higher than your calculation. You set aside $5,793 for the 0% bracket. How did you determine that?
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Old 04-20-2018, 10:36 AM   #23
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I would frame it differently then.

Let's assume that the qualified dividends, SS and RMDs are non-discretionary and the only discretionary items are additional IRA withdrawals or LTCG. Your friend's taxable income before discretionary items is $34,544 ($1,737 + $15,640 + $30,767 - $13,600). Within that, $1,737 is preferenced income (0%) and $32,807 is ordinary income which puts your friend in the 12% tax bracket.

If your friend does additonal IRA withdrawals, the first $4,156 (up to $38,700) would be taxed at 12%, the next $1,737 would be taxed at 27% and any additional withdrawals would be taxed at 22%. The momentary 27% marginal tax rate is because ordinary income gets taxed at 12% and it pushes the qualified dividends into the 15% tax bracket so both apply.

If your friend does LTCG, the first $4,056 (up to $38,600) would be at 0% and anything above that would be at 15%.

If I were your friend, I would prioritize LTCG over additional IRA withdrawals.
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Old 04-20-2018, 10:41 AM   #24
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.... You set aside $5,793 for the 0% bracket. How did you determine that?
$38,600 less $32,807 of ordinary income leaves $5,793 of headroom for 0% preferenced income. The $5,793 less $1,737 of qualified dividends leaves $4,056 of headroom for 0% LTCG.

It gets a bit confusing in that the top of the 12% tax bracket is $38,700 but the top of the 0% capital gains rate is $38,600.... stupid Congress!
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Old 04-20-2018, 01:15 PM   #25
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Thank you so much.

I want to convince my friend to keep as much as sensible in her IRA and start liquidating her LTCG investments.
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Old 04-20-2018, 02:33 PM   #26
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Yeah, thatís the best way to visualize it.
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Old 04-21-2018, 06:21 AM   #27
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If you are in a state that has an income tax please remember to check with them too.


In MN LTCG are all treated as ordinary income, this can result in a large tax bite on your state income tax return...
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Old 04-21-2018, 01:10 PM   #28
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My friend has a fixed amount of income in mind and RMD is not enough. Yes there will be state income tax but the same rate will apply to withdrawal from the IRA. The question for my friend is how much to tap each pot.

Personally I think that our taxes will go up as the debt increase is not sustainable. I wish my friend would establish a Roth and convert some tIRA $ but that is not something my friend is considering.

For myself excess RMD will go straight to Roth IRA.
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Old 04-22-2018, 04:35 AM   #29
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This is a great thread, I appreciate all the responses to help clarify LTCG. I posted in a different thread about converting tIRA to Roth and keeping tax rate down. I also have 6 properties that I would like to get rid of in the years before we have to take RMD's. With the current expected end date of current tax brackets being 12/2025, timing for me is good. I'll be 61 in 2025, and 59.5 has been my target to broom rentals. I will have to watch how much we sell to spread LTCG over multiple years. But as long as I get them gone before RMD age I should be good. Depending of course on potential changes to tax law.
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Old 04-22-2018, 04:41 AM   #30
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Also wanted to add as a complete aside that I have a lot to learn about distribution and this forum has been super helpful. I've been so focused on accumulation phase, now it's time to get smarter about distribution and tax avoidance!
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Old 04-22-2018, 07:08 AM   #31
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For myself excess RMD will go straight to Roth IRA.
If you are saying that you are going to do a roth conversion with the part of the RMD you don't need to spend, then I would be very careful. Your RMD must be withdrawn from your tax deferred account. You can use these dollars to pay the tax on a roth conversion, but you can't convert it into a roth. That would be seen as not taking your full RMD or as a new contribution (do you have employment income?) depending upon how you do it.

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Also wanted to add as a complete aside that I have a lot to learn about distribution and this forum has been super helpful. I've been so focused on accumulation phase, now it's time to get smarter about distribution and tax avoidance!
There is so much good information on this site. Remember the most important thing is to understand how these things effect you're situation. In this tread there were two type of tax graphs commonly used here: pb4uski's tax stack which most follows the tax brackets and the effective marginal (S.S.) where you effectively add $1 of ordinary income and see how the tax changes (effectively stick one dollar at the bottom of the pile and seeing the tax change). For stacks you may need to determine how much of things SS are taxable. If you are not looking at adding ordinary income to you taxable income, then the effective marginal rate may not be giving you good feed back.
Independent of these methods, if you focus on optimizing this year, you may create bigger tax problems in the long run. There is likely more more to be saved by determining the right tax diversification, conversion strategy, and withdraw strategy.
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Old 04-22-2018, 10:05 AM   #32
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This is a great thread, I appreciate all the responses to help clarify LTCG. I posted in a different thread about converting tIRA to Roth and keeping tax rate down. I also have 6 properties that I would like to get rid of in the years before we have to take RMD's. With the current expected end date of current tax brackets being 12/2025, timing for me is good. I'll be 61 in 2025, and 59.5 has been my target to broom rentals. I will have to watch how much we sell to spread LTCG over multiple years. But as long as I get them gone before RMD age I should be good. Depending of course on potential changes to tax law.
We "broomed" one of our rentals last year before we hit RMDs this year. By the time we wrapped up the taxes, we just barely escaped the top IRMMA bracket premium. You not only have to worry about the cap gains but also the recapture of depreciation AND what will happen to your Medicare premiums.
We had considered doing a 1031 but it was going to be time consuming to find replacement property and we really wanted to reduce our real estate allocation. Still have 3 units, but we may leave them to our heirs to deal with unless we stumble across a killer deal for a 1031 swap.
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Old 04-24-2018, 04:07 PM   #33
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Originally Posted by bingybear View Post
If you are saying that you are going to do a roth conversion with the part of the RMD you don't need to spend, then I would be very careful. Your RMD must be withdrawn from your tax deferred account. You can use these dollars to pay the tax on a roth conversion, but you can't convert it into a roth. That would be seen as not taking your full RMD or as a new contribution (do you have employment income?) depending upon how you do it.


There is so much good information on this site. Remember the most important thing is to understand how these things effect you're situation. In this tread there were two type of tax graphs commonly used here: pb4uski's tax stack which most follows the tax brackets and the effective marginal (S.S.) where you effectively add $1 of ordinary income and see how the tax changes (effectively stick one dollar at the bottom of the pile and seeing the tax change). For stacks you may need to determine how much of things SS are taxable. If you are not looking at adding ordinary income to you taxable income, then the effective marginal rate may not be giving you good feed back.
Independent of these methods, if you focus on optimizing this year, you may create bigger tax problems in the long run. There is likely more more to be saved by determining the right tax diversification, conversion strategy, and withdraw strategy.
By excess RMD I meant to say $ in excess of RMD from tIRA to existing rIRA. I am really retired.

I sent my friend a link to this thread when it started then walked her through her options on a spreadsheet this weekend. She was shocked at the difference in total tax for the same gross all depending on the ratio of IRA and LTCG, "It makes no sense!" I pointed out the plateaus on the graph and told her she didn't want to climb one of those. She also found it funny to see mocked up numbers that she knew were hers being kicked around. She also said that pb4uski is so smart..
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