Poll:What's your 2020 effective tax rate?

[FREE866]

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

 

[pb4uski]

$3,868/$52,400. And we only do federal because there are too many different states represented here.

 

[FREE866]

$3,868/$52,400. And we only do federal because there are too many different states represented here.

That's what I thought-thanks!

 

[Digger1000]

0% Federal
0% state

Health insurance premiums through ACA $0.

Live in Ohio

Retired 4 years ago at age 51.

 

[MarieIG]

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.)

 

[FANOFJESUS]

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.

 

[pb4uski]

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.

 

[CardsFan]

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.

 

[Digger1000]

+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.

 

[pb4uski]

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?

 

[Digger1000]

What tax bracket will you be in once you start SS and have RMDs?

When I called in to SS last year I was shocked how much SS I will get without ever working again. I plan on taking it at 70, that has been my plan for decades. If I took it at age 62 I would be getting about the exact same amount I am currently spending monthly. If I take it at 70(which is what I will do) I will be getting close to 1.5 times the amount I'm currently spending per month. To me I will be living like a king with SS plus whatever else I have my net worth at at that time. I'm not planning on SS being there but if it is, great.

22.5% of my net worth is in tIRA's/t403b's. I'm 17 years from having to take RMDs. I really dont know what my tax bracket will be then but I would imagine it will be the lowest or next to lowest. Who knows if I live to 72. I'm spending like I'll live to 172 but I dont know if I'll live through today. One never knows.

 

[pb4uski]

You can get a decent idea by putting your age 70 SS and age 72 RMDs (current tax-deferred account value/27.4) [-]in the moneychimp calculator.

Tax Calculator - Estimate Your Income Tax for 2020 and 2021 - Free!
[/-]
Since SS and tax brackets grow with inflation and tax-deferred money grows as well that is a place to start.... you could also reduce the account value used for RMDs by 17 years of Roth conversions.

But I suspect with only 22.5% of you net worth in tax-deferred that you probably don't have much of a tax torpedo.

ETA: Actually, use this one... I like this one better: https://www.dinkytown.net/java/1040-tax-calculator.html

 

[523HRR]

Effective = 21.2%
Marginal = 35%

 

[ArmchairMillionaire23]

I answered the poll estimating I would be in the 12% tax bracket.

Then I read the question.

After doing the math and using 2019 numbers since I haven't done my 2020 taxes yet I came up with 0.0313768495482519 which I guess works out to about 3.14%.

I'll see what changes for 2020 after I get my taxes done at the accountant.

 

[CardsFan]

I answered the poll estimating I would be in the 12% tax bracket.

Then I read the question.

After doing the math and using 2019 numbers since I haven't done my 2020 taxes yet I came up with 0.0313768495482519 which I guess works out to about 3.14%.

I'll see what changes for 2020 after I get my taxes done at the accountant.

I think you should order Pi tonight.

 

[WhenIsItTime]

Who wins on this? Low or high?

 

[ArmchairMillionaire23]

I think you should order Pi tonight.

I don't know how to order Pi. But I did order pizza tonight. Does that count?

 

[isisdave]

Maybe zero. Covid killed all the travel plans and most eating out, so we didn't have to withdraw from IRAs. RMDs start this year; my birthday qualified for the delay to age 72 by one day. Covid also clobbered half the income from our office condo, so most income is SS and not taxable due to such low AGI; the standard deduction will cover all of it.

 

[dixter]

Its a little too early to know as the tax forms have not been released yet...

I normally just wait and I'll do several what if tax returns on Turbotax with different reporting methods and I finally figure out which one is the best to file... some times you just don't know how much money you need to hide from one year to the next year... you don't have to report losses in the same year they happen... and you may need a bigger write off in a different year...

I have a feeling i will be living off of after tax dollars in 2021.. so for 2021 at least there won't be any taxes paid

 

[Out_the_Door]

I calculate it to be 9.6% for federal but it'll probably be less as I used the standard deduction to estimate it but my itemizations are always a smidgen higher.

 

[SecondCor521]

you don't have to report losses in the same year they happen... and you may need a bigger write off in a different year...

Uh, pretty sure you do have to. At least for Schedule C expenses, rental depreciation, and realize capital losses from investments you do.

Can you provide an example and perhaps a citation from the IRS that says you don't? I can't think of a situation offhand but maybe it does exist.

 

[jldavid47]

Who wins on this? Low or high?

When it comes to taxes, it should be scored like golf.

 

[WhenIsItTime]

When it comes to taxes, it should be scored like golf.

Then I’m losing! But I’m still thankful for position I’m in.

 

[FLSUnFIRE]

Income Tax Load: 12% Income Tax/Gross income (Earned plus div and capital gains realized)

Federal Tax Load: 19% Income Tax+OASDI+Medicare/Gross income/Income tax
Total Tax Load (FL): 22% (Income Tax+OASDI+Medicare+Property+Sales Tax)/Gross income (Earned+dividend, interest, and capital gains realized)/Income tax

 

[Time2]

2.4% effective 24% marginal (if I count loss of subsidies as a tax).

Can you give us a clue how you did this? I'm at the top of the 12% bracket and paying almost twice what you are.