What do you spend on income taxes and health care combined?

[jdnd9091]

I'm curious how so people mention paying 12% for their Toth conversion, but someone else paid 22%. Is it based on the amount of conversion? I would like to convert my entire 401K to a Roth when I retire which will probably be over a million. Just curious.

[SecondCor521]

Quote:

Originally Posted by jdnd9091 I'm curious how so people mention paying 12% for their Toth conversion, but someone else paid 22%. Is it based on the amount of conversion? I would like to convert my entire 401K to a Roth when I retire which will probably be over a million. Just curious.

Roth conversions are treated as ordinary income tax, so people paying 12% on their conversions are in the 12% bracket, and those paying 22% are in the 22% bracket. It basically is just a reflection that some people have (or choose to have) more taxable income than others for any number of reasons.

In 2021, I was in the 12% bracket based on my taxable income, but because of tax credits my actual federal income tax was $0, so I effectively had a 0% tax rate on my Roth conversions. In 2025 I tentatively plan to convert to the top of the 24% bracket, so I'll be taxed at 24% on my last Roth conversion dollars.

Depending on your overall circumstances, your $1M IRA may be a runaway, meaning it might be too large for you to convert as much as you want in the timeframe you want and still be beneficial to do so.

[FANOFJESUS]

Quote:

Originally Posted by swabby01 Between Fed and state about 40% mid six figure. Medicare Maxed out IRMAA and about $6k for my supplemental. Me only. Wife still working but her medical is still under my company I retired from (great benefit) for a 90/10 plan for around $70/month. Will miss that once she hits Medicare age

500k?

[ElCheapo]

Quote:

Originally Posted by Stormy Kromer Income Tax $5,400 Health Insurance $16,200 (unsubsidized ACA premium for DW & I)

Curious, your Income Tax is low enough that it looks like your implied income level would qualify you for ACA subsidy. What am i missing?

[SecondCor521]

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Originally Posted by ElCheapo Curious, your Income Tax is low enough that it looks like your implied income level would qualify you for ACA subsidy. What am i missing?

Perhaps the difference between AGI and taxable income? Or preferenced vs. ordinary income? Or tax credits?

For MFJ in 2021 in the lower 48, 400% of FPL is $68,960. 2021 standard deduction is $25,100 for 2021 for MFJ. That implies a taxable income of $43,860. If that's all ordinary income, then the federal tax on that is $4,867, which is already below what they said they paid in income tax.

Could be they included some state income tax as well, but if they had preferenced income such as LTCG or qualified dividends, then their AGI might be even higher given their tax bill. And if they had tax credits, depending on how they chose to treat them, those would result in a lower tax bill relative to AGI.

[jj]

Quote:

Originally Posted by FANOFJESUS 500k?

Quote:
Originally Posted by swabby01

Between Fed and state about 40% mid six figure. Medicare Maxed out IRMAA and about $6k for my supplemental. Me only. Wife still working but her medical is still under my company I retired from (great benefit) for a 90/10 plan for around $70/month. Will miss that once she hits Medicare age

500k?

$750k+ I should think for highest IRMAA level MFJ

[corn18]

Retire Mar 2021. Got a giant severance package. No Roth conversions or tax harvesting.



Income tax = $161k


Health care annual premiums:


Medical: $300 I am retired military and pay $25 / mo for Tricare

Dental: $360 This started as work coverage, then Cobra and now Benefeds

Vision: $240 same as dental


For 2022, I will have my pension, deferred comp and some more severance. All the extras end in 2024, so I'll use 2025:


Income Tax: $2500 Just my pension and the normal dividends. No Roth conversions but will tax gain harvest to the top of the 0% LTCG bracket. If I do Roth conversions, too, I will balance the tax gain harvesting with the Roth conversions to keep them in the 12%/15% bracket


Health Care premiums: The same. $900/year.