Poll:What's your 2020 effective tax rate?

[SnowballCamper]

This is just my curiosity. It seems people know what their tax refund or bill is. They also probably know what tax bracket they are in. But it takes a tiny bit of arithmetic to figure your effective tax rate = Total tax (line 24) / Total income (line 9). Mine is 5.74%.

Computing it as I've described admittedly omits non-taxable income such as disability, tax-exempt interest, etc. But since tax season is starting, we'll have consistent numbers at hand for those inclined to post responses. Thanks.

 

[pb4uski]

I haven't done my return yet, but based on my Excel model which I believe to be spot on I'll have a 1.56% effective rate (tax/total income) and a 10% ordinary income marginal tax rate and 15% preferenced income marginal tax rate.... but this is an unusual year for me.

My ordinary taxable income was only $33 because I botched my tIRA witdrawals for federal and state withholding by a little bit... so my ordinary tax was only $3. Meanwhile, my stock sales filled up the 0% LTCG bracket and spilled over a little.

Usually, I have mostly ordinary income from my pension and Roth conversions. I think my effective rate in 2021 will be about 8.5% and I'll be at the top of the 12% tax bracket. If I expand my Roth conversions into the 22% tax bracket then the effective rate will creep up some.

Above is federal only. 2020 we we part-year residents of Vermont and Florida... 2021 Florida.

 

[statsman]

I think my effective rate in 2021 will be about 8.5% and I'll be at the top of the 12% tax bracket.

Pretty much describes our tax situation for 2020. Spreadsheet calculates an effective rate of 8.64% for us.

 

[mistermike40]

Pretty much describes our tax situation for 2020. Spreadsheet calculates an effective rate of 8.64% for us.

Same here (though not sure of the exact effective tax rate).

 

[Gumby]

6.33% (federal). A fair amount of long term capital gains at 0% helped.

 

[geeky_grrl]

Are you talking just federal or federal + state? My state is much higher than my federal since I retired.

 

[2017ish]

Traveling this month, so don't have precise number on hand, but just less than 19% (Roth conversions to top of 24% bracket)

 

[SnowballCamper]

Are you talking just federal or federal + state? My state is much higher than my federal since I retired.

I was thinking just federal, since states with low income tax get you with sales or property tax instead...

 

[Mulligan]

My Federal effective was 18% last year, with pension contributing the majority of that. Dont remember state rate.

 

[geeky_grrl]

My federal was around 3% last year and I think I'm going to be in the same ballpark this year. I don't bother with real numbers until I get my 1099s. The 0% capital gains bracket keeps my federal taxes low.

 

[RobbieB]

I haven't received my Turbo Tax disc yet. Or any of the needed inputs. No 1099, no SS, no cap gain or dividends...

I'll be back in April.

 

[FANOFJESUS]

3% sounds really good but the ACA is almost like another income tax. This year I gave more to the ACA than the tax man. The good news for me is that is only temporary.

 

[SecondCor521]

0.0084% based on my pro forma estimate. This year I chose to Roth convert just enough to absorb all of my non-refundable tax credits. It's not 100% clear to me if that was the best option, but it wasn't the worst.

It seems to me that for the next few years as my kids finish college and I am on the ACA, that the marginal rate is really rather high at a fairly low AGI number because I have to add in loss of ACA subsidy and loss of FAFSA EFC ~ 53% if I did my math right for federal + state + ACA + EFC. Even with federal + state + IRMAA at age 72 with RMDs and 85% SS, my rate will be lower than that then (about 37%).

When it no longer affects my kids' college, I'll convert more - tentatively planning on top of 400% FPL.

 

[Dtail]

Since I manage my MAGI for ACA purposes and wish to hit the sweet spot on the Silver plan, my federal (and FLA state) rate is zero. The medical savings are worth more than Roth conversions at this pre Medicare age.

 

[Ole Red 29]

~20% effective tax. Roth conversions to the top of the 24% bracket.

 

[ER2B]

Total of 19% Federal (15%) and state (4%) effective tax rate. IRA withdrawals of 50K and Roth conversions to near 22%. DW also got paid for 18K for estate trustee fee.

 

[CyclingInvestor]

Fed 23% State 9% (mostly Roth conversions, a bit of SS)

 

[Gill]

How is effective tax rate relevant? Marginal tax rate is the significant number.

Gill

 

[foxfirev5]

Can't participate in the poll. With state and federal credits my 2021 income taxes are below zero by several thousand$$$$.

 

[jazz4cash]

This is just my curiosity. It seems people know what their tax refund or bill is. They also probably know what tax bracket they are in. But it takes a tiny bit of arithmetic to figure your effective tax rate = Total tax (line 24) / Total income (line 9). Mine is 5.74%.



Computing it as I've described admittedly omits non-taxable income such as disability, tax-exempt interest, etc. But since tax season is starting, we'll have consistent numbers at hand for those inclined to post responses. Thanks.

Not sure about those line numbers but we are at 16% tax liability/AGI but 13.8% tax liability/taxable income. Maybe .5% lower with muni bond interest.

 

[target2019]

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.

 

[scrabbler1]

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.

 

[scrabbler1]

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.

 

[skipro33]

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.

 

[pb4uski]

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.