The Tax Man Won’t Leave

[Sojourner]

We are very thankful for the blessings. Just hate paying so much in taxes.

Join the very, very large club. I also hate paying taxes. But, unlike you, I don't feel like I'm "missing" anything. People who make nearly $500k/year are, quite obviously, going to be heavily taxed. It's really as simple as that. If, by starting this thread, you were looking for some way to have your cake and eat it, too, then I think what you might be missing is a basic understanding of the personal income taxation system.

 

[JT90505]

II can only dream about having this type of first world problem.

A $480,000 income in the United States has enough buying power to put you in the 100th percentile globally.

I guess I'm having a very hard time understanding the OP post. With the income s/he has, a very good CPA/Tax Accountant/etc. could be hired. Verses posting on a forum where very few can even dream of of having this "problem".

I am happy for you, sit back and enjoy your good fortune! (even if you have to pay taxes on it)

 

[Dtail]

I was first so no splitting ..early bird and all that.

Okay I am not messing with this tough farm girl.

 

[Joylush]

We are blessed to earn $300K annually on our investments. Retirement pension income is $180K. We are in our early 60’s. Our allocation is split 50/50 between bonds & stocks. At the rate we’re going it looks like we’ll be paying the higher tax rate on our IRA withdrawals at 70 after all. What am I missing?

I too feel your pain and ignore those with snarky comments who aren’t in your situation. You worked hard, made smart choices and unfortunately the more you make the more they take, the more you have to pay for insurance to protect your assets as well. Being higher income means you’ve always been paying more all along and now you’re rewarded by having your social security taxed and having to pay higher Medicare premiums when that time comes. And you get to pay the extra Obamacare tax too.

 

[pb4uski]

We are very thankful for the blessings. Just hate paying so much in taxes. We do fund our own charitable foundation through a brokerage firm.

While I wouldn't do it, if you really hate paying taxes that much you can always move, pay any exit tax and renounce your US citizenship... then you might not have to pay so much in taxes.

https://www.nytimes.com/2019/12/06/your-money/wealth-renounce-us-citizenship.html

 

[jj]

Ok, I'll jump.

How to reduce taxable distributions to a minimum:

- Use index funds ETF's for stocks in taxable. This will keep short and long term capital gain distributions to an absolute minimum or zero.

- Use municipal bond (funds) for all fixed income needs that can't fit in deferred accounts - this will still affect your income for calculating IRMAA but will keep it out of your AGI for federal income tax purposes.

- Consider whether a couple of BRKA shares are a fit for your portfolio (currently $835k worth), Warren Buffet has committed to never declaring dividends (never say never, and someone will correct me if I'm wrong on that commitment.)

- Use I bonds (and EE bonds) to the maximum limits to defer income out 20 or 30 years. They can be bought in trusts to enhance the amount. (We started this in 2006 and now have a holding of over half a million dollars.)

I appreciate that selling assets may be tax-inefficient, but these actions going forward could reduce your current taxes.

 

[ivinsfan]

I too feel your pain and ignore those with snarky comments who aren’t in your situation. You worked hard, made smart choices and unfortunately the more you make the more they take, the more you have to pay for insurance to protect your assets as well. Being higher income means you’ve always been paying more all along and now you’re rewarded by having your social security taxed and having to pay higher Medicare premiums when that time comes. And you get to pay the extra Obamacare tax too.

I do have a question though, it's obvious our government has a more then vested interest in keeping the stock market high. A lot of that interest is self interest on the part of our elected officials. How much do think investors have benefited from government policy? The more you have, the more you benefit so doesn't it all work out in the end?


Ever since they started trashing interest rates it's been about the stock market.

 

[kgtest]

I would rather have a tax problem, then an income problem. Enjoy.

 

[RetireeRobert]

I would rather have a tax problem, then an income problem. Enjoy.

But my ultimate would be to have "neither" a tax problem nor an income problem!

 

[ncbill]

Gift to those who will be your heirs anyway...$30,000/year for the two of you w/o having to file a gift tax return.

 

[Joylush]

We are blessed to earn $300K annually on our investments. Retirement pension income is $180K. We are in our early 60’s. Our allocation is split 50/50 between bonds & stocks. At the rate we’re going it looks like we’ll be paying the higher tax rate on our IRA withdrawals at 70 after all. What am I missing?

Just have a plan to die with less than the federal death tax exclusion or you will literally be wasting 40% of your life’s earnings. I have found no other solution of protecting my money than to spend it or give it away to remain below the threshold.

 

[audreyh1]

 

[RetireeRobert]

He look a lot like Jack Nicholson in this pic!

 

[youbet]

We are blessed to earn $300K annually on our investments.

What do you include in earnings?

It's pretty universal to include interest and dividends paid by passive investments in taxable accounts. But some folks add in capital gains, payouts from owned or partially owned businesses, profits from rental properties, etc. Do you include tax deferred earnings from IRA's or similar? What is in your $300k bucket?

You mentioned a 50/50 AA which might predict a 2.5% combined interest + dividend rate. That implies a $12 MM portfolio (if all from a passive, taxable portfolio). Sound about right?

Unless you give us some more detail about your earnings, there isn't much to comment on.