2025 Tax Question Deductions Roth Conversion

[BooBoo]

Just making sure I have this correct. We are over 65 MFJ. Last year 2024, we used the standard deduction of $32,300. This year the the standard deduction will be $31,500 plus @12,000 for a total of 43,500 ? This means I would be able to convert an additional Roth conversion of $12,000 and still stay the same tax bracket? (12% in my case). Just trying to verify prior to making the conversion this year 2025. Thank for your input.
Boo

 

[pb4uski]

Yes. In addition to the $31,500 standard deduction for MFJ if you are both over 65 as the OP suggests then you would get an additional $3,200 ($1,600*2). In addition you will get the new 65+ deduction of $12,000 for a couple as long as your income is less than $150,000. The $12,000 phases out for incomes between $150,000 and $250,000 at 12% of the excess over $150,000.

So if under $150,000 then total deductions of $46,700.

 

[fosterscik]

If you are filing MFJ and have an AGI of less than $150,000 you are correct. However, I'd use a tax program to double check your numbers. I hopped on the black Friday H&R block offer to check my calculations. It seems to be fully functional and includes all the 2025 updates needed for my situation.

 

[Original Wally]

Std is $31,500 (MFJ) + $1,600 each for +65 = total of $34,70.

PLUS on the $12,000 beware of the phase out of the deduction to the extent that your AGI is above $150k

 

[pb4uski]

^^^ Since OP indicates that they are in the 12% bracket, I presume that phaseout isn't an issue.

 

[junkanoo]

Just making sure I have this correct. We are over 65 MFJ. Last year 2024, we used the standard deduction of $32,300. This year the the standard deduction will be $31,500 plus @12,000 for a total of 43,500 ? This means I would be able to convert an additional Roth conversion of $12,000 and still stay the same tax bracket? (12% in my case). Just trying to verify prior to making the conversion this year 2025. Thank for your input.
Boo

The answer is ... we can't tell you for sure. Because it depends how much of your AGI is ordinary income and the Roth Conversion will only add to ordinary income.

Best to just go to:

1040 Tax Calculator

Use this 1040 tax calculator to help estimate your tax bill for the current tax year's rates and rules.

www.dinkytown.net

and spend 5 minutes inputting your best estimates for 2025 (including the Roth conversion) and see what it tells you your marginal tax rate is. That said, as long as your MAGI (AGI plus any tax-exempt foreign income) is 150K or below ... that 12K Roth conversion is not going to have a big impact on your Effective Tax Rate.

You also could use the tool to show you how much Roth Conversions you could pull off while still staying in the 12% marginal tax rate.

 

[pb4uski]

^^^ That's incorrect. If the OP was asking what his tax would be then the mix of ordinary and preferenced income would be a factor, but the OP is asking what his standard deduction would be and that is knowable.

 

[junkanoo]

^^^ That's incorrect. If the OP was asking what his tax would be then the mix of ordinary and preferenced income would be a factor, but the OP is asking what his standard deduction would be and that is knowable.

The O.P. asked multiple questions including:

"This means I would be able to convert an additional Roth conversion of $12,000 and still stay the same tax bracket? (12% in my case). "

 

[pb4uski]

Yes, but if he starts out in the 12% tax bracket, adds in the new $12,000 65+ deduction and then adds an additional Roth conversion of $12,000, how in the world could his tax bracket be any different?

The mix of ordinary and preferenced income doesn't matter to that question either.

 

[junkanoo]

Yes, but if he starts out in the 12% tax bracket, adds in the new $12,000 65+ deduction and then adds an additional Roth conversion of $12,000, how in the world could his tax bracket be any different?

The mix of ordinary and preferenced income doesn't matter to that question either.

That's a false premise to build things on. We don't know how his 2024 income varies from his 2025 income. How often do we hear something like 'I messed up with my Roth Conversions because I forgot that my wife started SS this year' or something like ... 'I forgot that my pension payout last year was only for 7 months, not the full year.' Not to mention that BooBoo's taxable income has probably grown. That's why I suggested to BooBoo that he take his best estimates for 2025 and put them in Dinkytown. That will answer all of his questions. I very much doubt that if he were to go to a pro this December, that s(he) would say something like 'hey, let's just wing it with your 2024 income.'

What we do know is that BooBoo is targeting his possible Roth Conversion at the 12% marginal tax rate. And with 2025 tax rules in place, the O.P. *could* be in the 12% marginal tax bracket and just by doing the $12k Roth Conversion, slide into the 22% marginal tax bracket (all without losing a dime of that $12k Senior Discount).

 

[pb4uski]

You are making it way too complicated.

He asked: "... This means I would be able to convert an additional Roth conversion of $12,000 and still stay the same tax bracket? (12% in my case). ..."

So without the new 65+ deduction he would be in the 12% tax bracket. He's learned of the new 65+ deduction and thinks it will allow him to do an additional $12k of Roth conversions and is looking for confirmation. It's that simple. Why are you looking to make it more complicated?

 

[junkanoo]

You are making it way too complicated.

He asked: "... This means I would be able to convert an additional Roth conversion of $12,000 and still stay the same tax bracket? (12% in my case). ..."

So without the new 65+ deduction he would be in the 12% tax bracket. He's learned of the new 65+ deduction and thinks it will allow him to do an additional $12k of Roth conversions and is looking for confirmation. It's that simple. Why are you looking to make it more complicated?

First, you complain to methat BooBoo only cares about what his standard deduction will be for 2025. Then when you realize that's obviously wrong, you shift to complaining to me about something else.

I can't help you with that.

 

[pb4uski]

No matter how you read it the mix of ordinary income and preferences income that you were focused on doesn't matter.

 

[imjustawarrior]

Run it through tax software. That is the best answer.

Technically, you could stay in the 12% bracket and hit the "27% bracket" due to LTCG/qualified dividends. Tax software would show that and anything else that might bite you.

 

[Chuckanut]

I just did a very modest Roth conversion that will fill up some of the tax bracket. It’s modest because I want to avoid an IRMAA step. Though a minimal amount, over the next decade it will be a few hundred dollars more in my pocket. If I can do the same every year for the next decade, it might add up to real money. Maybe.

 

[Original Wally]

^^^ Since OP indicates that they are in the 12% bracket, I presume that phaseout isn't an issue.

Agreed, but OTHERS read these posts and it MAY apply to them. Shrug.

 

[pb4uski]

Oh, my mistake. I read your post as responding to the OPs question.

 

[HappilyRetired]

Std is $31,500 (MFJ) + $1,600 each for +65 = total of $34,70.

PLUS on the $12,000 beware of the phase out of the deduction to the extent that your AGI is above $150k

Important that you added the AGI factor. Our gross income is over $150k but after taking the MFJ of the $3,200 and the BBB deduction and the MFJ deduction we are down back under $96k , so all Qualified dividends are also not included when calculating the 12%. Life is grand in 2025!

Best to you and happy new year!

 

[junkanoo]

Important that you added the AGI factor. Our gross income is over $150k but after taking the MFJ of the $3,200 and the BBB deduction and the MFJ deduction we are down back under $96k , so all Qualified dividends are also not included when calculating the 12%. Life is grand in 2025!

Best to you and happy new year!

Sweet!