Time to check year end taxes

[Sunset]

Once you are paying NIIT aren’t you way past any hump?

Yes, but I wanted to see what the calculations came out to at the edge case of 22%.

We don't get SS yet, so the hump aspect for SS does not apply right now.

 

[Sunset]

Yeah, but if you're modeling things like seeing how well it works to take a bunch of income one year to stay out of the hump other years, it could be nice to use the same tool.

Yes, it has since I discovered NIIT, shown me that one could think of the NIIT as increasing the tax brackets for gross income over $250K.

AFAIK it treats all income the same, so even just LTCG's over $250K change from being taxed at 15% marginal rate to 18.5% marginal rate.

And for regular income, the 24% really becomes 27.5% .

 

[aida2003]

Yes, it has since I discovered NIIT, shown me that one could think of the NIIT as increasing the tax brackets for gross income over $250K.

AFAIK it treats all income the same, so even just LTCG's over $250K change from being taxed at 15% marginal rate to 18.5% marginal rate.

And for regular income, the 24% really becomes 27.5% .

Is $250K gross income for a single or MFJ?

Now, back to this spreadsheet and the thread overall, well, it's over my head for sure, so I have a different kind of questions. Hopefully I'm not high-jacking the thread:

- If a person (like me) is challenged to understand such intricate spreadsheets like OP's, is there a simpler kind of material to begin learning the differences between tax brackets and marginal taxes, what kind of income to withdraw from which account (taxable, IRA/401k, or Roth IRA) to keep AGI low for ACA and/or FAFSA purposes if we FIRE'd.

Ahh, just please don't recommend reading irs.gov. I'm hoping that there is some kind of blog or wiki that tackles such tax questions at the 1st grader's comprehension level . Are you aware of any?

Seeing this thread made me think that I should start learning the basics at least on how tax situation changes when one quits w*rk. Right now all we do is work for the corporate America, save, and raise our kiddos. No tax planning on our part yet.

Thanks in advance.

 

[Sandy & Shirley]

The top end of “The Hump” is about $157,000 for a married couple with a combined Social Security benefit of $80,000 a year and about $88,000 for a single individual with a $40,000 annual benefit. At $60,000 married the top end is $127,000 and $30,000 single is $74,000.

A lot of comments are made from those talking about numbers like $250,000 which is way beyond the concept of the Tax Hump. For those in high income levels like that, you can look back over your shoulder and know that 15% of your benefits were tax free and you paid a lower rate on your LTCGs. As your income increases you might be faced with tax rate as high as 37%.

My posts are aimed at those near the top of the 12% Federal Bracket or slightly into the 22% bracket. With LTCGs their “Marginal” tax rate could be 49.95% at the top of the 12% bracket and 40.7% as they start the 22% bracket.

 

[Sunset]

The top end of “The Hump” is about $157,000 for a married couple with a combined Social Security benefit of $80,000 a year and about $88,000 for a single individual with a $40,000 annual benefit. At $60,000 married the top end is $127,000 and $30,000 single is $74,000.

A lot of comments are made from those talking about numbers like $250,000 which is way beyond the concept of the Tax Hump. For those in high income levels like that, you can look back over your shoulder and know that 15% of your benefits were tax free and you paid a lower rate on your LTCGs. As your income increases you might be faced with tax rate as high as 37%.

My posts are aimed at those near the top of the 12% Federal Bracket or slightly into the 22% bracket. With LTCGs their “Marginal” tax rate could be 49.95% at the top of the 12% bracket and 40.7% as they start the 22% bracket.

Don't worry folks, my checking of the 250K limit was due to the discovery of NIIT.

Now we are not yet on SS, and I realize the spreadsheet was made for SS folks.
However, it works for non SS folks, and prior to SS is the ideal time, due to the HUMP when collecting SS, to convert IRA to ROTH.

Note that in converting, one also has to watch out for the medicare inspection years of 3 years prior to actual claiming !!

So if you stashed too much in IRA's and not enough in ROTH, then the younger years with current lower tax rates are the ideal time to back up the truck and do conversions.

Why do this, because a good CCRC admission is $500,000 -> $1 MM which would have a HUGE tax bill if taken out of an IRA in 1 year.

 

[Sunset]

Is $250K gross income for a single or MFJ?

....

for MFJ

But it really is just moving $$$ from one account to another, except that the Gov't will tax that action as income.

It's not what we spend on crap each yr.

 

[simple girl]

Now, back to this spreadsheet and the thread overall, well, it's over my head for sure, so I have a different kind of questions. Hopefully I'm not high-jacking the thread:

- If a person (like me) is challenged to understand such intricate spreadsheets like OP's, is there a simpler kind of material to begin learning the differences between tax brackets and marginal taxes, what kind of income to withdraw from which account (taxable, IRA/401k, or Roth IRA) to keep AGI low for ACA and/or FAFSA purposes if we FIRE'd.

Ahh, just please don't recommend reading irs.gov. I'm hoping that there is some kind of blog or wiki that tackles such tax questions at the 1st grader's comprehension level . Are you aware of any?

Seeing this thread made me think that I should start learning the basics at least on how tax situation changes when one quits w*rk. Right now all we do is work for the corporate America, save, and raise our kiddos. No tax planning on our part yet.

Thanks in advance.

You may want to start a thread on the healthcare forum about this.

Useful links I have found so far:

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

Optimizing Our Retirement Income // ACA and Taxes Vs Actual Cashflow


How The Premium Assistance Tax Credit For Health Insurance Impacts The Marginal Tax Rate


Obamacare Optimization vs Tax Minimization


DON’T FALL OFF THE AFFORDABLE CARE ACT SUBSIDY CLIFFS

 

[RunningBum]

You may want to start a thread on the healthcare forum about this.

I agree that a new thread should be started. Anytime you realize you're hijacking an active thread for a very different slant, it's time to start a new thread. But it's a Fire&Money topic, not healthcare.