Help! Good 2026 tax year estimator?

[junkanoo]

snip ...

I'll also check the surviving spouse scenario with this tool, I know taxes and IRMA will jump, but that could be far enough out that I'm not sure I want to bother trying to optimize that one.

Well worth doing in my view, not so much to try to optimize (something that won't be optimized) but to get a handle on last-to-die's likely tax situation. I think many expect it to be higher than the numbers will indicate.

That and just getting a better understanding of the widow(er)'s income after expenses and taxes. For many couples, the husband is the first to die. Along with that is the husband's more likely higher expenses that now disappear. Like that $850 graphite fishing rod, the golf expenses, the vintage car expenses, guitars, etc. These tend to be significantly more expensive (in aggregate) than her Majhong tiles, card game and beauty treatments. So, it tends to work out that, after the spouse dies, she hasn't typically lost much in income (often just the double SS) and with lower expenses, she turns out to be in great shape.

After all, it's not about just the taxes, it's about living without financial worries.

 

[Al18]

I think RothIRA conversions are a good deal. When your RMD's start in 2027, I'm guessing your taxes will be much higher.

 

[pb4uski]

... I'd say it's misleading to look at effective/average tax rates. If I am deciding on an action (such as Roth conversion), then I need to understand the cost of that action...

Spot on. So the baseline is your taxes before any Roth conversions. Then after Roth conversions. The increase in tax divided by the Roth conversion is the cost of that action.

In your case, I think some will be at 18.5% (10% * 185%) until your taxable income exceeds the 10% tax bracket, then 22.2% (12%*185%).

 

[junkanoo]

But the Roth conversion is actually taxed at 18.5%, due to the SS tax effect. What I learned from all this is that you can't just look at the top of the 12% bracket.

I'd say it's misleading to look at effective/average tax rates. If I am deciding on an action (such as Roth conversion), then I need to understand the cost of that action, versus the saving of that action. For me, the cost is 18.5% of the conversion, the savings is versus 22 or 24%. And that savings takes time to realize, as you only reduce your IRA balance by that conversion amount, and your RMD is a % of the total. My rough calcs show it takes me ~ 13 years to break even on a 12% vs 24% tax rate, but that depends on the size of your IRA (if your conversion reduces it to zero, that payback is in a single year). I think the investment opportunity costs wash out.

To illustrate effective vs marginal, say I have a $5 coupon for a $10 grocery item. If I clip and use that coupon, I save $5, or 50% if I buy just that one item. If I use it with a total of $100 of groceries, I still save $5, but now it is only a 5% savings. But it doesn't matter, $5 is $5 resulting from the action of clipping and using the coupon. Everything else is not relevant, and misleading if I try to apply it to the arithmetic. I might say 5% savings is not worth the effort compared to a 50% savings. But the effort is the same, and the savings is the same, and I should not be dissuaded by bad math.

Agreed, as long as it is applied reasonably. Let's leave that payback idea for another day.

First, understand the cost of inaction. In other words, what's the likely outcome from doing nothing.

To do that:

1. Understand the cost of a Roth conversion in 2026 based on your situation. What does it cost for different levels of Roth conversions and what are your total taxes.

2. Estimate the cost of RMDs if you did nothing i.e, inaction. Perhaps 20 years out as a couple and perhaps 25 years out as the remaining spouse. Your future income could be estimated by your growth rate on the different income segments minus your estimate for inflation (that way the tax brackets don't have to be changed as you can make a decent assumption that the tax brackets will largely keep up with inflation). If it's an annuity with no inflation protection, in today's dollars, it would need to be discounted. RMD calculators will provide future RMDs based on whatever growth rate you use.

Figure out your total taxes. But, you also need to know what those RMDs will cost you. To do this correctly, you need to understand the cost of the RMDs after all other income is accounted for. In other words, the highest tax brackets after all other income is accounted for. For many, it will turn out that the widow (for example) might have RMDs that are taxed at the 12-22-24-32% tax bracket (edit). So, the true cost of the RMD will be instructive (along with the total). After all, what's the point of not knowing the true cost of those RMDs *if* you don't do Roth conversions? Said another way, what's the logic of assigning all RMDs to the widow's highest marginal tax bracket (32%) when the widow is only through that bracket for a cup of coffee?

 

[SevenUp]

But, you also need to know what those RMDs will cost you. To do this correctly, you need to understand the cost of the RMDs after all other income is accounted for. In other words, the highest tax brackets after all other income is accounted for.

Yes - another example of why marginal rates should drive the traditional vs. Roth choice.

For many, it will turn out that the widow (for example) might have RMDs that are taxed at the 15-22-24-32% tax bracket. So, the true cost of the RMD will be instructive (along with the total). After all, what's the point of not knowing the true cost of those RMDs *if* you don't do Roth conversions? Said another way, what's the logic of assigning all RMDs to the widow's highest marginal tax bracket (32%) when the widow is only through that bracket for a cup of coffee?

It would take at least ~$190K for an RMD to span the top of the 12% to the bottom of the 32% bracket for a single filer. And there could be NIIT, IRMAA, etc., effects along the way.

To the extent conversions reduce RMDs, that reduction comes "off the top" so in this example it would start at 32%. Good point that if there is only $4.95 (or so) in the 32% bracket without conversion, for practical purposes it would be a 24% (plus maybe IRMAA) future savings.

 

[junkanoo]

Yes - another example of why marginal rates should drive the traditional vs. Roth choice.

It would take at least ~$190K for an RMD to span the top of the 12% to the bottom of the 32% bracket for a single filer. And there could be NIIT, IRMAA, etc., effects along the way.

To the extent conversions reduce RMDs, that reduction comes "off the top" so in this example it would start at 32%. Good point that if there is only $4.95 (or so) in the 32% bracket without conversion, for practical purposes it would be a 24% (plus maybe IRMAA) future savings.

IRMAA for sure. I was just trying to make a point about methodology.

 

[ERD50]

... Said another way, what's the logic of assigning all RMDs to the widow's highest marginal tax bracket (32%) when the widow is only through that bracket for a cup of coffee?

Good point - if the added income only pushes a bit into that next bracket, then it's misleading to put too much weight on that bracket. Most will be taxed at the next lower bracket.

If one of us passes before the other, yes, our bracket will go up. But that will likely be far enough in the future, I'm not sure it's worth paying a portion of those taxes in advance. Might be 15 years before that higher bracket hits, and then maybe only for another 5 years of higher rates before surviving spouse passes?

Of course, those numbers could be all over the place, and with little certainty for most couples (maybe more certainty if there are significant age differences and/or known health issues). I guess I just feel the 12% now versus 24% plus is a certain enough for me to do while I can do it to the top of the 12% bracket. But there is too much uncertainty going very far past that. Like any decision regarding an unknown future, I could end up being wrong (with 20/20 hindsight). Others may decide to be more aggressive with their conversion rates - I don't think there is any right/wrong to it, just a different personal decision.

 

[junkanoo]

Good point - if the added income only pushes a bit into that next bracket, then it's misleading to put too much weight on that bracket. Most will be taxed at the next lower bracket.

If one of us passes before the other, yes, our bracket will go up. But that will likely be far enough in the future, I'm not sure it's worth paying a portion of those taxes in advance. Might be 15 years before that higher bracket hits, and then maybe only for another 5 years of higher rates before surviving spouse passes?

Of course, those numbers could be all over the place, and with little certainty for most couples (maybe more certainty if there are significant age differences and/or known health issues). I guess I just feel the 12% now versus 24% plus is a certain enough for me to do while I can do it to the top of the 12% bracket. But there is too much uncertainty going very far past that. Like any decision regarding an unknown future, I could end up being wrong (with 20/20 hindsight). Others may decide to be more aggressive with their conversion rates - I don't think there is any right/wrong to it, just a different personal decision.

Hard to pass up on a 12% conversion in my view. It's when it's at the higher levels that raises some good questions. I just read a new book that described an 80-year-old widow with $198,020 RMD (from a $4 million T-IRA account). That RMD was taxed from the 12 percent bracket to the 32% bracket as follows:

RMD	Bracket	Total	Average
19,425	0.12	2,331.00
54,875	0.22	12,072.50
93,950	0.24	22,548.00
29,770	0.32	9,526.40
198,020		46,477.90	0.2347

So, should someone be doing a 22% now, to be taxed at 23.5% later (only on that RMD) when her Effective tax rate is 21.97% (including NIIT)? Naturally, IRMAA attributed to what RMDs could have been consumed need to be factored in as well.

However, other strategies should be considered too. If the widow were to do a $29,770 QCD to get out of the 32% bracket, with the remaining RMDs taxed at 22% ... was the Roth Conversion the better plan? What about the cost of money? As you will be paying now with more valuable dollars than later with less valuable dollars?

I think that some people hate paying taxes more than they like making money. This widow has over $200,000 of after-tax income to live on. Take the win. If the government gets some non-optimal tax payments late in life - the football equivalent to garbage time - so be it. Even at this stage, the Federal government still isn't taking a quarter of every dollar of income.

Again, that's a widow with a $4 million deferred account at age 80. How many of us fit into that category to begin with?

 

[SevenUp]

Hard to pass up on a 12% conversion in my view. It's when it's at the higher levels that raises some good questions. I just read a new book that described an 80-year-old widow with $198,020 RMD (from a $4 million T-IRA account). That RMD was taxed from the 12 percent bracket to the 32% bracket as follows:

RMD	Bracket	Total	Average
19,425	0.12	2,331.00
54,875	0.22	12,072.50
93,950	0.24	22,548.00
29,770	0.32	9,526.40
198,020		46,477.90	0.2347

So, should someone be doing a 22% now, to be taxed at 23.5% later (only on that RMD) when her Effective tax rate is 21.97% (including NIIT)?

You should ignore effective rates when evaluating Roth conversions. Conversions that incur only a 22% tax now won't touch the RMDs in the 12% or 22% brackets, and perhaps not even the 24% bracket.

So yes, converting at 22% now to reduce the amount being taxed at 32% later is a good idea.

Converting at 22% to avoid 24%, especially if the conversion tax can be paid from cash flow, is also a good idea if you reasonably expect the 24% rate (or higher) to be true when the time comes.

Of course, if QCDs will be used, that changes the marginal rate on RMDs so you would have to look at the RMD amount above the QCD amount.

 

[junkanoo]

You should ignore effective rates when evaluating Roth conversions. Conversions that incur only a 22% tax now won't touch the RMDs in the 12% or 22% brackets, and perhaps not even the 24% bracket.

So yes, converting at 22% now to reduce the amount being taxed at 32% later is a good idea.

Converting at 22% to avoid 24%, especially if the conversion tax can be paid from cash flow, is also a good idea if you reasonably expect the 24% rate (or higher) to be true when the time comes.

Of course, if QCDs will be used, that changes the marginal rate on RMDs so you would have to look at the RMD amount above the QCD amount.

Perhaps you missed the fact that this is an 80-year-old widow (now). Her situation is her situation. Obviously, she is not doing a Roth conversion at her age when she is in the 32% marginal tax bracket. However, if charity is of interest for her, she can do a QCD to get her out of her highest marginal tax bracket. So, there is no conversion at 22% to reduce some her 32% marginal tax rate thingy involved.

However, as addressed in my post, her result is suboptimal but, newsflash, so is all planning. However, we can't put her back in the wayback time machine. But, guess what? All planning efforts will be imperfect and yes, suboptimal. We don't know when we are going to die or be a widow/widower or whether we are going to remarry or what our investments will be worth years in the future or what tax brackets or what tax breaks will transpire et cetera, et cetera. So, you might wish to guess that your spouse (or yourself) may be in the 32% tax bracket 20 years out and for many years, but that's just it, it's a guess you might be seriously wrong about or is a nothing-burger to your future self.

What we do know is this widow's situation in 2025. And her RMDs are taxed at the 12-22-24-32% brackets, making them no big deal. And yes, looking at her Effective Tax rate is knowledge and knowledge is power. And that knowledge informs us that the government is getting less than 25% from this widow allowing her to bomb along with $200k in after-tax income.

So, again, back to the O.P.'s situation, doing Roth conversions in the 12% bracket is smart in my view. Doing them at the 22% bracket? To pay 22% now, when he might be in the 32% bracket for a cup of coffee? To pay 22% now, when his taxes in the future are (at best) unclear? Nope.

 

[SevenUp]

Perhaps you missed the fact that this is an 80-year-old widow (now).

Nope, didn't miss that.

What we do know is this widow's situation in 2025. And her RMDs are taxed at the 12-22-24-32% brackets, making them no big deal. And yes, looking at her Effective Tax rate is knowledge and knowledge is power.

Knowledge misapplied does no good. See Marginal Vs Effective Tax Rates And When To Use Each.

So, again, back to the O.P.'s situation, doing Roth conversions in the 12% bracket is smart in my view. Doing them at the 22% bracket? To pay 22% now, when he might be in the 32% bracket for a cup of coffee? To pay 22% now, when his taxes in the future are (at best) unclear? Nope.

It being a free country, you and anyone else can choose that path and that's OK. Others may see different things in their crystal balls and thus make different choices, and that's OK too.

But using either of the Common misconceptions to inform those choices is just wrong.

 

[junkanoo]

But using either of the Common misconceptions to inform those choices is just wrong.

From your "Common misconceptions" link:

"The first misconception is sometimes described as "contributions are taken from the top tax rate and are withdrawn later at the average rate". In other words, that you save a marginal rate when contributing but pay only an average rate (starting at 0% for the first dollar withdrawn) when withdrawing."

Pay attention. That's not what the example did. Instead, it taxed every dollar of other income before considering RMDs. Said another way, the highest tax brackets were allotted to RMDs. C'est la difference.

The example I cited comes from the book:

Tax Planning To and Through Early Retirement by Cody Garrett (CFP) and Sean Mullaney (CPA)​

Mullaney was a feature presenter at last year's Boglehead conference and appeared recently on White Coat Investor's podcast.

38:12 mark and onward is particularly instructive but is no substitute for the book.

Or perhaps you just know best.

 

[SevenUp]

So, should someone be doing a 22% now, to be taxed at 23.5% later (only on that RMD) when her Effective tax rate is 21.97% (including NIIT)?

If you didn't mean to compare marginal now to effective later, then perhaps we do agree....

 

[schenbew]

Found this tax spreadsheet on a link found on the Bogleheads Retiree Portfolio Model Spreadsheet Useful Planning Information section. Requires downloading and use of Excel or LibreCalc, but it is absolutely the most complete tax planning calculator I've found - 63 tabs covering nearly every conceivable tax situation:

Income Tax Spreadsheet

 

[UpQuark]

I guess I'll skip doing Roth conversions this year. Previously, I was able to do ~ $30K and stay in the 12% bracket, but we both take SS in 2026, so it looks like I can only do it @ 18.5%, not quite as a clear win as 12%.

What about LTCGain harvesting, have you checked if you have any room to do that?

 

[NameTaken2]

Been trying AI lately. Have paid estimated taxes for 8yrs while filling the 12% with Roth conversions. We're starting Social Security this year, so to get an idea how that will impact estimated taxes and available conversion amount while continuing to fill the 12% bracket I recently used AI (ChatGPT) to request a 2026 tax estimate.

Estimate 2026 state and federal income tax for: MFJ, ages 67 and 65, social security income $xx, dividend income $xx, qualified dividends $xx, IRA distribution $xx, LTCG $xx, foreign tax credit $xx. Standard deduction.

No, I do NOT blindly trust AI-
But the answer format was far superior to just calculator numbers, and the "would you like me to now provide x, y, z" at the end of each answer provided lots of value: got more stuff like a federal tax worksheet, detailed state estimate, Roth conversion ladder 2026-2032, survivor tax impact, year-by-year Roth conversion plan built specifically around income profile, tax brackets, capital-gains sweet spot, state rules, and survivor risk, annual tax and Roth conversion checklist, and "survivor what to do first guide".

Say what you will, but this was enlightening -made "estimate calculators" seem like dinosaurs.
AI is the future.

 

[ERD50]

What about LTCGain harvesting, have you checked if you have any room to do that?

I used up all my losses a few years ago. All my taxable investments have pretty good gains now, my plan is to never touch these and kids inherit with step up cost basis.

 

[UpQuark]

I used up all my losses a few years ago.

I meant 'gain' harvesting to reset the basis, not loss harvesting. But since you don't plan to sell any taxable positions then it makes sense you wouldn't.
There were a couple years right after I retired that I would have really benefited from gain harvesting, but I'd not heard of it at that point.

 

[G-Man]

I meant 'gain' harvesting to reset the basis, not loss harvesting. But since you don't plan to sell any taxable positions then it makes sense you wouldn't.
There were a couple years right after I retired that I would have really benefited from gain harvesting, but I'd not heard of it at that point.

I assume tax gain harvesting only works if you pay 0% taxes on the LTGC in a year where your income is low. How else would it benefit you?

 

[UpQuark]

I assume tax gain harvesting only works if you pay 0% taxes on the LTGC in a year where your income is low. How else would it benefit you?

Yes, and I had a couple years in early retirement where I was using cash (due to retiring in 2022 into a down market) and I totally wasted that big lovely 0% tax threshold on LTCG. Even now tho since I haven't started RMDs there seems to be a little chunk of the 0% range available. The complicated 'income stacking' and formula for taxing Social Security is too much for me to figure out, but in the tax estimator tools I just increase the amount of LTCG until the tax owed suddenly jumps, then I back out a little and that is the amount of capital gains I can still harvest (sell and immediately repurchase to reset the basis, so I pay less tax when I want to sell in the future).