Simple Tax question

[Camas Lilly]

Was that a residence or a rental? What was the cost basis of the house?
Capital assets generally get a step-up in basis to date-of-death value so there may be only a small gain from date-of-death to sale price. Ask the executor.

House $387,500. Cost basis $287,500 / 2 = $147,500 for my part.

 

[Camas Lilly]

Assume that the $25,716 isn't really the standard deduction but are itemized deductions since standard deduction for MFJ for 2020 is $24,800.

$67,471 is taxable ordinary income, not taxable income... taxable income is $69,792 (income of $95,508 less deductions of $25,716).

From what you wrote in the other thread, the sale is likely to be the proceeds from the sale of LLC shares and is likely LTCG.... but that part may get a bit complicated.

Hmmm. So if it were considered LTCG at 15%, that sounds better than 22 - 24%, right?

 

[pb4uski]

Based on what you wrote in the other thread, I think you mean that your cost basis is $100,000... so the gain is $287,500 and your half of the gain is $147,500.

 

[pb4uski]

Hmmm. So if it were considered LTCG at 15%, that sounds better than 22 - 24%, right?

Yup.

 

[Camas Lilly]

Based on what you wrote in the other thread, I think you mean that your cost basis is $100,000... so the gain is $287,500 and your half of the gain is $147,500.

Thank you. I’m not at my desk with that information anymore.

 

[deserat]

The web pages given by kaneohe and pb4uski use the same tool. That seems the best of the web-based ones.

For spreadsheets, Excel1040 and the Case Study Spreadsheet seem best.

Which will be best for you is a combination of your specific tax situation and a matter of taste.

Wow - thanks for those links/downloads. I do my taxes by hand every year and build my own stripped down excel sheet for calculations. These sheets will make it *much* easier each year.

Thank you again!

 

[Koolau]

Heh, heh, Just a suggestion. Hire a professional (like a CPA - not a store front or "big name" tax preparer.) My taxes are medium complicated (Fed, two states and a small business). I think I paid $600 this year. Maybe that sounds like a lot, but I'm guessing OP's would be half or less of that (SWAG).

Then, if you get ambitious next year, use the professionally prepared taxes as a template. Naturally, YMMV.

 

[Camas Lilly]

Heh, heh, Just a suggestion. Hire a professional (like a CPA - not a store front or "big name" tax preparer.) My taxes are medium complicated (Fed, two states and a small business). I think I paid $600 this year. Maybe that sounds like a lot, but I'm guessing OP's would be half or less of that (SWAG).

Then, if you get ambitious next year, use the professionally prepared taxes as a template. Naturally, YMMV.

Thanks, I might do that.

 

[Winemaker]

The sale shouldn't complicate things too much unless you have held the inherited house for a period of time of great appreciation. The cost basis house you inherited was stepped up on the date of death, you would only pay LTCG taxes on your share of appreciation since the time of death.

 

[Camas Lilly]

The sale shouldn't complicate things too much unless you have held the inherited house for a period of time of great appreciation. The cost basis house you inherited was stepped up on the date of death, you would only pay LTCG taxes on your share of appreciation since the time of death.

Actually. is has appreciated quite a bit over the last 10 years, but I've already figured the taxes and it should not be too bad.

 

[Time2]

Thank you. Will have to do some re-figuring.

I use this one: https://www.dinkytown.net/java/1040-tax-calculator.html

I just used this calcultor to tax plan for this year. I had already used another calculator and found I would have a tax of $350 before jumping to another bracket, the dinkytown calcultaor came up with $353 before jumping to another bracket. As it stands, my LTCGs are at 0% and my tIRA are at 10%. Adding $100 to my LTCGs or my tIRA withdrawals increases my tax my $10 (10%) or $25 (25%) respectively.

 

[Time2]

Heh, heh, Just a suggestion. Hire a professional (like a CPA - not a store front or "big name" tax preparer.) My taxes are medium complicated (Fed, two states and a small business). I think I paid $600 this year. Maybe that sounds like a lot, but I'm guessing OP's would be half or less of that (SWAG).

Then, if you get ambitious next year, use the professionally prepared taxes as a template. Naturally, YMMV.

If you plan on getting ambitious as suggested, make sure your CPA gives you the worksheets for the calculations. I had planned to "get ambitious this year, but then found I didn't have any of the worksheets in my tax preparation.
I would ask for them, but when I got the $600 bill from him, I complained that he increased the bill by $100, when the prep was about half as complicated as the year before because we retired and also no longer were self employed.
He lowered it to $400. I won't use him again.

 

[Time2]

Question about the dinkytown calculator. https://www.dinkytown.net/java/1040-tax-calculator.html

I put in all my numbers, LTCGs, Divi's, HSA contribution and tIRA withdrawals. If I add $100 more to tIRA withdrawals, I get $25 more tax, but, just above the bar chart there is a paragraph that ends with, "This puts you in the 12% tax bracket." We know $25 tax on $100 is 25%. So, am I missing something or is their calculator just not reporting what I expect?

 

[kaneohe]

Question about the dinkytown calculator. https://www.dinkytown.net/java/1040-tax-calculator.html

I put in all my numbers, LTCGs, Divi's, HSA contribution and tIRA withdrawals. If I add $100 more to tIRA withdrawals, I get $25 more tax, but, just above the bar chart there is a paragraph that ends with, "This puts you in the 12% tax bracket." We know $25 tax on $100 is 25%. So, am I missing something or is their calculator just not reporting what I expect?

try putting your numbers here https://www.mortgagecalculator.org/calcs/1040-calculator.php

supposedly the same calculator ........and see if you get the same thing.

 

[pb4uski]

Question about the dinkytown calculator. https://www.dinkytown.net/java/1040-tax-calculator.html

I put in all my numbers, LTCGs, Divi's, HSA contribution and tIRA withdrawals. If I add $100 more to tIRA withdrawals, I get $25 more tax, but, just above the bar chart there is a paragraph that ends with, "This puts you in the 12% tax bracket." We know $25 tax on $100 is 25%. So, am I missing something or is their calculator just not reporting what I expect?

I wonder if you might be in that inbetween where $100 of additional ordinary income is being taxed at 12% and ends up pushing $100 of LTCG/qualified dividends from 0% to 15%... so $27 increase in tax that somehow gets rounded down to $25.

So for example, if your income was $80k before any adjustments and your ordinary income was in the 12% bracket but not near the top of the 12% bracket... if you add $100 of tIRA withdrawals that is taxed at 12% and pushed $100 from the 0% preferenced income bracket to the 15% preferenced income bracket.

Or maybe the reported tax bracket is just wrong.

 

[Time2]

I wonder if you might be in that inbetween where $100 of additional ordinary income is being taxed at 12% and ends up pushing $100 of LTCG/qualified dividends from 0% to 15%... so $27 increase in tax that somehow gets rounded down to $25.

So for example, if your income was $80k before any adjustments and your ordinary income was in the 12% bracket but not near the top of the 12% bracket... if you add $100 of tIRA withdrawals that is taxed at 12% and pushed $100 from the 0% preferenced income bracket to the 15% preferenced income bracket.

Or maybe the reported tax bracket is just wrong.

I think you might have it! If I add $100 to LTCGs, my tax goes up $10, if I add $100 to tIRA distributions it adds $25. Maybe that's 10% LTCGs and 15% tIRA distributions, but still not 12%.

 

[pb4uski]

What is the taxable income and qualified dividends/LTCG before you add the $100?

 

[kaneohe]

Isn't the reported tax bracket based on taxable income?.......so if LTCG is moved into 22% bracket (where CG taxed at 15%), the reported tax bracket would normally be called 22% .

 

[Time2]

What is the taxable income and qualified dividends/LTCG before you add the $100?

Here is the data.
MFJ, $6500 Qualified divi's, $70,000 LTCGs, tIRA dist, $37,700, HSA contribution $8,100, one person 65yrs old.($26,100 standard deduction)
To your question, not sure which line, Taxable income is $80,000, AGI is $106,100, Income $114,200.


P.S.

The Qualified Divi's may have some unqualified in them. I don't know yet, adjustments may be made!
Mostly VTSAX or VTI.

 

[pb4uski]

Here is what is happening.

Of the $80,000 of taxable income, $76,500 ($70,000 LTCG + $6,500 qualified dividends) is qualified income and $3,500 ($37,700 tIRA distb - $8,100 HSA contribution - $26,100 standard deduction) is ordinary income and in the 10% tax bracket.

Add $100 of ordinary income and the increase in ordinary income is taxed at 10% and it bumps $100 of preferenced income from the 0% bracket to the 15% bracket.... so the total tax increases by $25 or 25% of the incremental income.

 

[Perryinva]

A different form of tax torpedo. But isn’t it hard to coordinate LTCGs and qualified divs to an exact amount in advance?

 

[Time2]

OK,I thought I had a good plan, but your questions pushed me to look further.
Previously, I had $340 tax when I took $71,100 of LTCGs and $6500 divi's , $37,600 tIRA and $8100 HSA.

Now if I push my tIRA withdrawal up to $72,700 and my LTCGs/Divi's down to $35,000, I pay $4,228 in tax, but if I Roth Convert the $72,700, I did it at 12%. I do want to maximize my Roth Conversions at 12%.
Again adding $100, bumps me to a higher bracket.

A problem? I have about $15k of divi's so far, as income this year, and I only paid $1000 in quarterlies, thinking I was going to pay $340 total tax.
How do I handle that?

 

[Time2]

A different form of tax torpedo. But isn’t it hard to coordinate LTCGs and qualified divs to an exact amount in advance?

It won't be perfect, I'd probably rather pay a little extra tax at 22% than not maximize my Roth Conversion.
I think I can get the LTCGs pretty close, but won't know the exact Divi's until it's to late.

 

[kaneohe]

I think you might have it! If I add $100 to LTCGs, my tax goes up $10, if I add $100 to tIRA distributions it adds $25. Maybe that's 10% LTCGs and 15% tIRA distributions, but still not 12%.

perhaps you might have switched things around? If I add 100 to CG, tax goes up 15; if I instead add 100 to TIRA dist, tax goes up 25 as explained by pb4uski.
The 12% bracket is because your taxable income w/ the 100 extra income is 80100......which is within the 12% bracket w/ upper limit of 80250. The behavior is a bit weird because the 0% bracket for CG ends at 80000.

You can find the bracket limits in the linked calculator below the main calculation........the ordinary income brackets first, then the CG brackets down below.

 

[SevenUp]

Question about the dinkytown calculator. https://www.dinkytown.net/java/1040-tax-calculator.html

I put in all my numbers, LTCGs, Divi's, HSA contribution and tIRA withdrawals. If I add $100 more to tIRA withdrawals, I get $25 more tax, but, just above the bar chart there is a paragraph that ends with, "This puts you in the 12% tax bracket." We know $25 tax on $100 is 25%. So, am I missing something or is their calculator just not reporting what I expect?

If you want to see a chart of marginal rates for your specific situation, the case study spreadsheet in Excel is reasonably easy to use.