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View Poll Results: What is your effective income tax rate
0-4.99% 19 13.38%
5.0-9.99% 28 19.72%
10.0-14.99% 33 23.24%
15.0-19.99% 25 17.61%
20-24.99% 18 12.68%
25% or more 19 13.38%
Voters: 142. You may not vote on this poll

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Old 01-15-2021, 01:59 PM   #41
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23% Married filing jointly. ER'd 1993, age 50 with 250k ballpark net worth. Zilch tax rate.

Fast forward 27 years age 77 net worth way higher and my pals at the IRS are helping me via RMD.

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Old 01-16-2021, 04:14 PM   #42
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Around 7%. 2019 was 13% due to Roth conversions.
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Old 01-16-2021, 05:12 PM   #43
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2020 is our 2nd year converting to the top of the 22% bracket. Effective rate is 14.4%. That's up from 13.6% last year because we sold our last rental this year, with most of the gain taxed at 15%. Without conversions and property sales, we are around 5% with just two small pensions and a bunch of 0% QDs and LTCGs. No state income tax.
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Old 01-16-2021, 08:08 PM   #44
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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.
Quoted my self just to add a note.

While effective tax rate is interesting, the incremental tax rate, when doing Roth conversions should also be considered.

In my 2020 estimate above, although the effective tax rate is "only" 11-12%, I estimate the incremental rate for the extra conversion to be about 16%. I looked at going higher with the conversion, but the extra taxes (including IRMAA, which is not strictly a tax, but effectively is) could push the effective rate of the conversion over 24%.
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Old 01-16-2021, 08:19 PM   #45
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2.4% effective 24% marginal (if I count loss of subsidies as a tax).
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Old 01-17-2021, 12:11 AM   #46
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While effective tax rate is interesting, the incremental tax rate, when doing Roth conversions should also be considered.
Right. Although my effective rate was 0.0084%, my marginal rate was 52.625%, which I why I didn't Roth convert any more than I did.
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Old 01-17-2021, 10:40 AM   #47
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I recall a similar thread last year and having the same problem answering because of inconsistent treatment of tax credits.

Taking the specifics of the OP, I come in with a tax rate of paying 5.5% of line 9 to the treasury. But the fact is that the treasury paid me.

Considering the numerator simply as line 24 includes non-refundable credits, but ignores refundable credits. It all comes from, or goes to the US treasury, so the labeling difference seems arbitrary.

I propose that a more consistent definition would be to subtract the non-payments portion of line 31 from line 24. And also subtract the advanced PTC amount (8962 Line 25). I've tried out this definition and found that no matter what the advanced PTC amount is, it comes to the same tax rate.

And in my case the tax rate is negative 16.1%.
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Old 01-17-2021, 12:16 PM   #48
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3.4% if my preliminary TurboTax estimate is right. Downloading the actual brokerage numbers won't happen for awhile.

Interesting thoughts about Roth conversions. I was kind of looking forward to the refund (basically lower capital gains than anticipated in my Estimated payments) but I should look into that.
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Old 01-17-2021, 12:57 PM   #49
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Per TurboTax with everything accounted for 2.94%.
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Old 01-17-2021, 01:20 PM   #50
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2019: Fed = 17.5% + State = 4.5%
2020: About the same
Roth conversions are pushing it up
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Old 01-17-2021, 01:55 PM   #51
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Question. To calculate my effective tax rate do I look at just federal tax rate?
and do you factor out the standard deduction?
My 2020 federal tax should be ~$3868 ---do I divide that by $52,400? or $40,000 ( taking into account the $12,400 standard deduction I receive)?
thanks
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Old 01-17-2021, 08:05 PM   #52
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$3,868/$52,400. And we only do federal because there are too many different states represented here.
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Old 01-17-2021, 08:14 PM   #53
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$3,868/$52,400. And we only do federal because there are too many different states represented here.

That's what I thought-thanks!
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Old 01-18-2021, 10:31 AM   #54
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0% Federal
0% state

Health insurance premiums through ACA $0.

Live in Ohio

Retired 4 years ago at age 51.
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Old 01-18-2021, 10:40 AM   #55
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Originally Posted by unclemick View Post
23% Married filing jointly. ER'd 1993, age 50 with 250k ballpark net worth. Zilch tax rate.

Fast forward 27 years age 77 net worth way higher and my pals at the IRS are helping me via RMD.

Index funds and time in the market!

Heh heh heh - PLUS! Really cheap, I mean really cheap SOB in early years of ER. The Four Yorkshiremen remains the favorite video posted on this forum. Hindsight says less fear and more spend cause you can't take it with you. ;
To the extent possible, I would prefer to be really cheap the first few years due to SORR to allow for a cushion. (Unfortunately, DH is not a proponet of being really cheap.)
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Old 01-18-2021, 12:05 PM   #56
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0% Federal
0% state

Health insurance premiums through ACA $0.

Live in Ohio

Retired 4 years ago at age 51.
That is very impressive. My goal is to be like you but have state at 3% I can't get to 0 on that.
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Old 01-18-2021, 04:27 PM   #57
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That is very impressive. My goal is to be like you but have state at 3% I can't get to 0 on that.
I dunno, if he has tax-deferred money it might be suboptimal forgoing no or low cost Roth conversions. I could easily have a 0% tax rate but would end up paying more later.
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Old 01-18-2021, 05:57 PM   #58
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I dunno, if he has tax-deferred money it might be suboptimal forgoing no or low cost Roth conversions. I could easily have a 0% tax rate but would end up paying more later.
+1

I had that thought the first year I retired. Then, after doing more reading here, I realized I could pay lower taxes now (Roth conversions), versus higher later.

FWIW, paying "optional" taxes is emotionally hard to do.
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Old 01-18-2021, 10:50 PM   #59
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+1

I had that thought the first year I retired. Then, after doing more reading here, I realized I could pay lower taxes now (Roth conversions), versus higher later.

FWIW, paying "optional" taxes is emotionally hard to do.
I am converting 15k a year to a Roth IRA and am still paying $0 Federal and $0 state income tax along with $0 health insurance premiums. I rent an apartment in a big city. It just doesnt take a lot for me to live on. I have everything I want or need. My yearly spending rate has been 2.3% of the net worth I had when I retired 4 years ago at age 51 or 1.4% of my current net worth.
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Old 01-19-2021, 07:40 AM   #60
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I am converting 15k a year to a Roth IRA and am still paying $0 Federal and $0 state income tax along with $0 health insurance premiums. I rent an apartment in a big city. It just doesnt take a lot for me to live on. I have everything I want or need. My yearly spending rate has been 2.3% of the net worth I had when I retired 4 years ago at age 51 or 1.4% of my current net worth.
What tax bracket will you be in once you start SS and have RMDs?
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