Poll: Your 2021 Taxes Federal Tax Rate

[scrabbler1]

Line 9, Total Income, only includes 85% of my SS income.
So we probably should correct for that...

That's why I suggested the ACA's MAGI, because it adds back the untaxed SS income as well as other untaxed income such as muni bond income.

 

[USGrant1962]

...

Those taking dividends from their Roth accounts as distributions probably consider that as gross income so maybe correct for that as well.

It’s all just playing with numbers and probably means very little.

...

The simple (and IMO, wrong) [Total tax (line 24) / Total income (line 9)] this year for me is 19.1%. The reason I don't think it's accurate is the haphazard treatment of tax credits (see quoted post from last year).

...

Line 9, Total Income, only includes 85% of my SS income.
So we probably should correct for that...

Look - a rabbit hole! I agree that we are just playing with numbers. But for a common discussion basis or poll, Line 24 / Line 9 seems most reasonable. My point was really that AGI, which is frequently suggested, is an even worse basis.

There are all kinds of cash flows that may or may not be considered income in the tax system - gifts received, basis on taxable sales, Roth withdrawals, tax credits, tax exempt interest, even the non-taxable portion of SS (notionally considered return of your contributions).

Us analytical types are invited to model the numbers to our hearts content - but see my sig...

 

[ncbill]

Probably around 7%...includes a partial Roth conversion targeted to fill up the 12% (MFJ) bracket.

Unfortunately my state charges a flat 5.25% income tax on the same mAGI.

 

[thod]

Mine was 11.4%, but about 1/3 of the AGI was Roth Conversions.

 

[aaronc879]

I had zero Federal tax liability after credits. The one good thing about being low income. I would very happily trade with any of you who had double digit tax liability since you had why more money than me after all was settled.

 

[scrabbler1]

I had zero Federal tax liability after credits. The one good thing about being low income. I would very happily trade with any of you who had double digit tax liability since you had why more money than me after all was settled.

I didn't include the excess ACA premium tax credit which not only eliminated my total tax liability but allowed me to get a large refund (and the IRS has no clue about the return I filed nearly 2 months ago). The excess premium was a result of the ARP change to the ACA subsidy calculation and a technical issue with my enrollment in January of 2021. I consider the overpayment of HI premium like backhanded tax over-withholding.

 

[athena53]

TurboTax shows mine as 4.63%, which is tax/AGI.

 

[Beldar]

0% again for 3 years running, playing the ACA credits game.

-B (channeling Leona Helmsley)

 

[F.I.R.E User]

Marginal is what counts right?

 

[lem1955]

Turbo Tax says my effective rate was 13.8%, which is really close to Total Tax Due/Total Income (13.93%). I can't explain the difference. Total Tax Due/AGI is 14.7%

 

[Sojourner]

My federal tax rate for 2021 was about 16%, which is a bit higher than I expect it to be going forward. I didn't plan as carefully as I should have with respect to some stock sales early in the year, followed by (much) larger than expected CG distributions later in the year. This year's rate should be under 15%... I hope!

 

[USGrant1962]

Marginal is what counts right?

Marginal counts for specific financial decisions (on the margin). Effective counts for voting.

 

[scrabbler1]

I have 2 marginal (federal) rates. One is for QD/LTCG (or muni bond income), which is 0% in taxes but a ~13% reduction in the ACA premium subsidy. The other is for ordinary income, which is 10% in taxes but the same ~14% reduction in the ACA premium subsidy.

 

[target2019]

TurboTax shows mine as 4.63%, which is tax/AGI.

Yes, TurboTax is using total tax (line 24) and AGI (line 11) for the effective tax rate that shows at the bottom of two-year comparison.

 

[Time2]

Dividing my tax paid by my gross income, I get 14.2%.
I did a $78,000 Roth Conversion, paid $29,000 in Tuition, made an $8,200 HSA contribution and gifted $15,000. The remainder is our living expenses for 2022.
Tuition payments are all done so I can either do even larger Roth conversions, or, pay less tax!! Decisions, decisions.

 

[RetireAge50]

1.4% effective
>25% marginal

 

[karen1972]

I ended up with a negative effective tax rate due to getting ACA credit refunds, ignoring those it would have been 2%. I miscalculated my dividends else I would have done more tax harvesting as I'd prefer my tax rate to be more in the 6-8% range in order to spread it out over time.

 

[jldavid47]

0%. We aren't poor. We just like to look that way to the taxing authorities.
If I plan well it should be 0% again this year.

 

[kcowan]

Heavily into withdrawals yet the overall rate continues to be 13% for sixth year in a row. No other taxes due.

 

[Car-Guy]

I had to launch TT to find mine.. Didn't remember but I have now voted.

 

[scrabbler1]

I ended up with a negative effective tax rate due to getting ACA credit refunds, ignoring those it would have been 2%. I miscalculated my dividends else I would have done more tax harvesting as I'd prefer my tax rate to be more in the 6-8% range in order to spread it out over time.

I think you should ignore the ACA credit refunds, as I have done. The ACA subsidy reconciliation (form 8962) is simply a reimbursement of HI premium paid to the IC except that it is run through the income tax system. Same deal for any missing EIP payments which are run through the income tax system and can be used to offset any tax liability.

In 2020, I had a tax liability of about $900 which was eliminated by an unreceived EIP payment and an undercalculated ACA subsidy, together resulting in a small tax refund which I rolled into 2021. In 2021, with about the same tax liability, an undercalculated ACA subsidy more than wiped out the tax liability.

I don't consider my based-on-income tax liability to be zero or negative, simply because these other programs were run through the income tax system.

 

[sengsational]

I think you should ignore the ACA credit refunds, as I have done. The ACA subsidy reconciliation (form 8962) is simply a reimbursement of HI premium paid to the IC except that it is run through the income tax system. Same deal for any missing EIP payments which are run through the income tax system and can be used to offset any tax liability
....
I don't consider my based-on-income tax liability to be zero or negative, simply because these other programs were run through the income tax system.

You've got a point there. Depending on what you want to measure. If you want to measure "tax rate", then ignoring credits is going to do that (except for line 24 includes some credits).

If you want to measure cash interactions with the federal treasury, then credits should probably be included. For me, when looking at overall tax rate, I'm more interested in the sum total of all transactions with the treasury. If it was a couple of hundred bucks, it wouldn't matter much, but when it's $18K, ah, that's a nice chunk of change to not overlook.

 

[Hermit]

According to Turbotax, the number is 11.37%.

But if I add in the IRMAA that I also have to transfer from my pocket to Uncle Sam's this year, the number is 16.9%.

I turned 72 this year, so with RMDs, the number will only go up from here.

 

[disneysteve]

Ours was 15.29%. I am not retired.

 

[Exit 2024]

For this poll I will simply use tax due (1040 line 24) divided by total income (1040 line 9). Using that standard our federal effective tax rate is 9.6%.

Let the games begin!

Using this formula ours is 15.5%