Join Early Retirement Today
View Poll Results: What is your effective income tax rate
0-4.99% 15 12.71%
5.0-9.99% 26 22.03%
10.0-14.99% 28 23.73%
15.0-19.99% 21 17.80%
20-24.99% 12 10.17%
25% or more 16 13.56%
Voters: 118. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Old 01-13-2021, 10:11 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: Stuck in the mud somewhere in the NJ swamp
Posts: 6,824
I use 15% total Fed and State effective tax rate when estimating. Taxes vary year to year, and I no longer chase that number. Just use 15% in planner(s) and pay estimated taxes with the estimator in TurboTax. It's better to over-estimate IMO.

The actual effective rate depends on tax program and how it is calculated. Note that 2019 line numbers do not agree with those in the OP.
target2019 is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-13-2021, 10:16 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2009
Posts: 5,767
About 2.8% federal, 3.7% state. I am using what will be a good estimate for my qualified dividends. That being said, I have two large tax credits (excess ACA subsidy and 12/2020 stimulus payment) I will be filing for which will result in my getting a federal tax refund for the first time in at least 15 years.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 01-13-2021, 10:19 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2009
Posts: 5,767
Quote:
Originally Posted by Gill View Post
How is effective tax rate relevant? Marginal tax rate is the significant number.

Gill
The marginal tax rate is not always a single number because many of us have different income sources which get taxed differently. Also, the tax code has some odd hiccups in its brackets which result in some marginal rate spikes. Then, if you combine state and federal taxes, income is often taxed differently between the two.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 01-13-2021, 10:26 AM   #24
Thinks s/he gets paid by the post
skipro33's Avatar
 
Join Date: Sep 2011
Location: Placerville
Posts: 1,457
Line 24 divided by line 9 has me at 8.6%.
But my income was more if you consider the 15% of Social Security that was exempt from taxes, making for a smaller percentage.
skipro33 is online now   Reply With Quote
Old 01-13-2021, 10:30 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 28,217
Quote:
Originally Posted by Gill View Post
How is effective tax rate relevant? Marginal tax rate is the significant number.

Gill
Certainly, if one is making a financial decision like whether or not to do Roth conversions or to do additonal Roth conversions so something like that then the marginal rate is relevant to the decision.

The effective rate is more in the category of "interesting". For example, as much as people moan about taxes a MFJ couple with $100k of ordary income only pays about 8.6%... far less than their 12% marginal tax rate. Similarly a MFJ couple with $200k of ordinary income pays 16.5%... far less than their 24% marginal tax rate.

Its amazing to me the number of people who don't know the difference between effective and marginal rates... if they are told that they are in the 24% tax bracket and have $200k of income they think they pay $48k in taxes when it is really "only" $33k.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 01-13-2021, 11:02 AM   #26
Thinks s/he gets paid by the post
Dash man's Avatar
 
Join Date: Mar 2013
Location: Limerick
Posts: 2,904
We’re hovering around 25% Federal. Between Roth conversions and a last set of options to exercise, we are well into the 32% bracket.
Dash man is offline   Reply With Quote
Old 01-13-2021, 11:58 AM   #27
Dryer sheet wannabe
 
Join Date: Nov 2020
Posts: 24
I'm going to make some adjustments to end up at the top of the 12% bracket.
qwerty3656 is offline   Reply With Quote
Old 01-13-2021, 12:02 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 28,217
^^^ If you have any qualified dividends or LTCG be careful... there is a $250 difference between the top of the 0% qualified dividends/LTCG tax bracket and the 12% ordinary income tax bracket where additional ordinary income it taxed at 27% because it pushes qualified income from the 0% tax bracket to the 15% tax bracket. Not that $37.50 is a huge deal but just something to be aware of.

To avoid this, end up with $40k of taxable income if single or $80k if MFJ.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 01-13-2021, 02:25 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 7,392
Quote:
Originally Posted by pb4uski View Post
^^^ If you have any qualified dividends or LTCG be careful... there is a $250 difference between the top of the 0% qualified dividends/LTCG tax bracket and the 12% ordinary income tax bracket where additional ordinary income it taxed at 27% because it pushes qualified income from the 0% tax bracket to the 15% tax bracket. Not that $37.50 is a huge deal but just something to be aware of.

To avoid this, end up with $40k of taxable income if single or $80k if MFJ.
Yup, converted Roth for my DGF up to 40k.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 01-13-2021, 03:01 PM   #30
Recycles dryer sheets
 
Join Date: Sep 2016
Location: Way up North
Posts: 340
Fed 26.2% for 2020. No state income tax.

2020 was the highest income year for me ever. Perfect storm of massive forced overtime due to covid19, held at work later into the year than expected because of regulatory hiccups, and mega-corp's generous, but inflexible severance pay-out. 2021 will be a high earning year because of mega-corp's inflexible lump payout of NQDC. Pauper status from 2022 onward.
__________________
Retired 9/30/20 at age 61 from Evil Mega Big Oil Corp (EMBO corp)
A day in retirement is like a day on the farm. Every meal's a banquet. Every day's a parade. Every SS & pension check a fortune!
bada bing is online now   Reply With Quote
Old 01-13-2021, 05:00 PM   #31
Full time employment: Posting here.
 
Join Date: Jun 2014
Posts: 958
9.05% - Including paying back the ACA subsidy as I went over
6.25% - Excluding the ACA subsidy.
karen1972 is offline   Reply With Quote
Old 01-13-2021, 06:40 PM   #32
Thinks s/he gets paid by the post
rk911's Avatar
 
Join Date: Dec 2018
Location: DuPage County IL
Posts: 1,195
without looking roughly 14-16%.
__________________
Rich
Ham Radio, Sport Pilot, RVer
FIRE: 8/11/2005, age 55y,1d
Administrator for a regional 9-1-1 call center
rk911 is offline   Reply With Quote
Old 01-13-2021, 06:57 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 28,043
I will let you know maybe in March.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 01-13-2021, 08:12 PM   #34
Thinks s/he gets paid by the post
jollystomper's Avatar
 
Join Date: Apr 2012
Posts: 3,236
Preliminary estimates are 10.4% Federal, 5.8% state. Hopefully it will not vary much once the "official" income forms are received and the tax return is updated.
__________________
FIREd date: June 26, 2018 - wwwwwwhat a rush!
jollystomper is offline   Reply With Quote
Old 01-13-2021, 09:37 PM   #35
Recycles dryer sheets
Out of Steam's Avatar
 
Join Date: Mar 2017
Posts: 379
Haven't made a full calculation yet, but about 7% Federal. More likely less than more.
Out of Steam is offline   Reply With Quote
Old 01-15-2021, 06:58 AM   #36
Full time employment: Posting here.
 
Join Date: Aug 2015
Posts: 807
I didn’t answer the poll because while it has traditionally been roughly 14%, (did anyone ask if that included FICA & MED?) 2020 included, starting 2021 I expect it to be lower as this will be the first of what I hope to be many years of a lower effective income tax now that I will never get an earned income check, and never pay FICA or MED. And what about Roth rollovers? That also increases the effective rate now for a lower rate later on. This will be my first year doing rollovers through 2025, unless tax rates are lowered (unlikely) for the current 22%. At any rate, why is this any different than knowing what bracket we are in, besides where in the bracket you are? Everyone at the same place in any bracket is paying the same effective rate, right?

Similarly, I would find it interesting, if the poll existed, at what gross income retirees are living on, (including tax free withdrawals from Roth & HSA) compared to what their gross income was, say, on average the last 5 years working. My projections show I should be living on roughly the same net in retirement for significantly less gross. I know I read here that many pay zero or practically zero, with income of over 100k, which I find fascinating. Naturally, those with decent pensions will still be paying taxes forever once their SS kicks in.

And congratulations to bada bing. Great feeling, right? Getting paid to do nuthin!
Perryinva is offline   Reply With Quote
Old 01-15-2021, 07:08 AM   #37
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Location: St. Charles
Posts: 2,409
For tax year 2019 it was 5.8%, with Roth conversions to the top of the 12% bracket.

For 2020, I estimate 11-12%, with Roth conversions into the 22% bracket, but below the first IRMAA break point.

Without conversions, it would be 0%.

Federal taxes only.
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
CardsFan is offline   Reply With Quote
Old 01-15-2021, 07:14 AM   #38
Full time employment: Posting here.
 
Join Date: Aug 2015
Posts: 807
DOH! I just reread the poll and somehow missed that the question was for 2020 effective rate, so I voted at 14%, assuming just Federal was the intent. I also pay about 5% state. If I were to include FICA & MED, then the effective rate would be lower some, since this was the first year I only paid FICA through July (severance) and will be the first time in over 35 years I did not max out SS. So even though it was fairly close to the max, everything paid in this year adds a big fat zero to my SS.
Perryinva is offline   Reply With Quote
Old 01-15-2021, 01:11 PM   #39
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 4,896
Quote:
Originally Posted by Perryinva View Post
I didn’t answer the poll because while it has traditionally been roughly 14%, (did anyone ask if that included FICA & MED?) 2020 included, starting 2021 I expect it to be lower as this will be the first of what I hope to be many years of a lower effective income tax now that I will never get an earned income check, and never pay FICA or MED. And what about Roth rollovers? That also increases the effective rate now for a lower rate later on. This will be my first year doing rollovers through 2025, unless tax rates are lowered (unlikely) for the current 22%.
It's a perennial discussion about how to calculate tax rates, but the OP did give a definition in the OP. That's what I used because that's what they asked for. Their definition would exclude OASDI taxes (except maybe SE taxes) and include Roth rollovers to the extent those are taxable (usually 100%).

Quote:
Originally Posted by Perryinva View Post
At any rate, why is this any different than knowing what bracket we are in, besides where in the bracket you are? Everyone at the same place in any bracket is paying the same effective rate, right?
Nope. The tax bracket you're in reflects your marginal rate - the amount you'd pay on the next $1 of income. Effective rate, which is what the OP asked about, is essentially the average of the tax rates on all the $1s which are taxed. So someone near the bottom of the 24% bracket would have a lower effective rate than someone near the top of the 24% bracket, even though their marginal rates would be the same.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Old 01-15-2021, 01:45 PM   #40
Full time employment: Posting here.
Taxman59's Avatar
 
Join Date: Sep 2014
Posts: 599
Rediculously high due to the ACA subsidy lost actual taxes are about 15 (combined Fed and state) and the ACA premium add back for another 20%!
Taxman59 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 4 (0 members and 4 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
To Retirees, What is your effective Income Tax rate ? cyber888 Life after FIRE 52 06-25-2019 10:13 PM
What is Your Effective Tax Rate? mickeyd FIRE and Money 50 03-16-2016 02:57 PM
Poll: What is your effective Federal income taxes paid / AGI rate? LOL! FIRE and Money 45 08-21-2012 09:22 AM
Tax Bracket vs. Effective rate ratface FIRE and Money 30 03-29-2009 09:16 AM
Heres a good one...whats your effective tax rate cute fuzzy bunny FIRE and Money 47 04-07-2006 12:10 PM

» Quick Links

 
All times are GMT -6. The time now is 01:21 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.