Poll: Your 2021 Taxes Federal Tax Rate

[38Chevy454]

Since it is now close to tax due date for 2021 taxes, thought it would be interesting to see what your effective federal tax rate is for 2021 taxes. Just your overall percentage after all the various calculations. I haven't seen a thread on this for 2021 tax year.

State tax rate not applicable since there are so many differences.

My federal rate is 12.78% overall. Thanks (?) to doing Roth conversions, should save me some come RMD time I hope.

 

[jazz4cash]

Is this tax Actual Tax Due/ Income, Actual Tax Due / Adjusted Gross Income, or Actual Tax Due/ Taxable Income?

 

[swakyaby]

My federal effective tax rate was 14.11% while the marginal tax bracket was 22%.

 

[CardsFan]

According to Turbotax, our effective federal rate was 11.85%. Of course, without the hefty Roth conversion, it would have been close to zero. So the effective tax rate in the conversion was over 18%.

 

[RonBoyd]

Tax questions always confuse me... so I will go with this: The effective tax rate is the percentage of income paid in taxes. The effective tax rate is the overall tax rate paid on earned income. The most straightforward way to calculate effective tax rate is to divide the income tax expense by the earnings (or income earned) before taxes.

We had $0 tax liability in 2021 and that is what we paid. So, I guess the answer is 0%.

 

[grasshopper]

TurboTax says 2.61% effective tax rate. We did the largest roth conversion ever.

 

[Dtail]

Managing my income for ACA purposes, so zero tax rate. Converted Roth up to 12% for the DGF.

 

[scrabbler1]

As a percentage of MAGI, the income amount used in the ACA premium subsidy calculation (it includes muni bond income, for example), it's 2.7%. If I change the income type (to AGI or TI), the percentage will rise.

 

[Happyras]

Our effective rate dropped a full 1% to 17% in 2021. However our marginal rate was still 24%, and our cap gains rate was 20%. We had more cap gains income and slightly less interest income , but also we did not do any Roth conversions. My guess is we are stuck in this effective rate for some time until the RMD's kick in and double wammy tax hikes, both in 2026!

 

[jebmke]

I have no idea what our effective rate is. Our marginal rate is 27% for Federal and 7.65% for state. When I start social security in 2023 our marginal rate will fall to 22% I think.

 

[dtbach]

It doesn't really concern me. I just pay what TurboTax says I have to and the Feds and State seem happy about it.

 

[Retireby45ish]

Our effective rate dropped a full 1% to 17% in 2021. However our marginal rate was still 24%, and our cap gains rate was 20%. We had more cap gains income and slightly less interest income , but also we did not do any Roth conversions. My guess is we are stuck in this effective rate for some time until the RMD's kick in and double wammy tax hikes, both in 2026!

Does anyone have any insight into the new cap gains rates at that time (if they revert back)? I was wondering if there would still be a 0% bucket or not. I’ve googled and can’t find this info.

 

[RunningBum]

Does anyone have any insight into the new cap gains rates at that time (if they revert back)? I was wondering if there would still be a 0% bucket or not. I’ve googled and can’t find this info.

There was a 0% bucket before the brackets reduced, so the sunset provision that would revert rates in 2026 to previous levels would not affect the 0% bucket, as I understand it.

 

[jollystomper]

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!

 

[Montecfo]

4.94 pct effective
12 percent marginal.

I gain harvested right to top of the 0% LTCG bracket.

 

[calmloki]

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!

I'll follow that lead: 19.16% to the feds using your formula.

 

[Alan]

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%.

That is also how TurboTax does the calculation.

4.97% for us this year

Marginal tax bracket 24%

 

[target2019]

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!

7.4%

 

[Magus]

Right at 30% federal effective rate last year after I mail in this final $43k.

My parents were 0 federal rate - went up to the max on LT capital gains at 0.

 

[38Chevy454]

Yes, the overall tax rate I was referring to is as most have defined it, your tax due divided by your adjusted gross income.

The poll results are pretty even across the choices. I thought it might have more at the low end, but that isn't the case.

 

[USGrant1962]

Yes, the overall tax rate I was referring to is as most have defined it, your tax due divided by your adjusted gross income.

The poll results are pretty even across the choices. I thought it might have more at the low end, but that isn't the case.

Well, most above have defined it as Total Tax (Line 24) divided by Total Income (Line 9), which is the best answer. AGI (Line 11) includes tax code benefits (HSA deduction, SE tax deduction, and others) and so already has some of the "effective" aspect built in. You double-count tax breaks if you start with AGI.

Every thread that talks about effective tax goes down this rabbit hole - really for no reason. Total Income is total income and is the denominator for effective tax rate. AGI and MAGI have nothing to do with it - they are just intermediate calculations to meet certain aspects of the tax code.

 

[sengsational]

Last year my overall rate was negative 16.1%, this year, it's positive 9.9%.

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).

Because the tax law change where the 400% FPL cliff was removed, plus some other life/modeling assumption changes, I decided I needed a whopper of a Roth conversion in 2021. So I'm a net contributor again after many years of not being one.

Here's my post from 431 days ago:

I recall a similar thread last year and having the same problem answering because of inconsistent treatment of tax credits.

Taking the specifics of the OP [Total tax (line 24) / Total income (line 9)], I come in with a tax rate of paying 5.5% of line 9 to the treasury. But the fact is that the treasury paid me.

Considering the numerator simply as line 24 includes non-refundable credits, but ignores refundable credits. It all comes from, or goes to the US treasury, so the labeling difference seems arbitrary.

I propose that a more consistent definition would be to subtract the non-payments portion of line 31 from line 24. And also subtract the advanced PTC amount (8962 Line 25). I've tried out this definition and found that no matter what the advanced PTC amount is, it comes to the same tax rate.

And in my case the tax rate is negative 16.1%.

 

[TheWizard]

Well, most above have defined it as Total Tax (Line 24) divided by Total Income (Line 9), which is the best answer. AGI (Line 11) includes tax code benefits (HSA deduction, SE tax deduction, and others) and so already has some of the "effective" aspect built in. You double-count tax breaks if you start with AGI.

Every thread that talks about effective tax goes down this rabbit hole - really for no reason. Total Income is total income and is the denominator for effective tax rate. AGI and MAGI have nothing to do with it - they are just intermediate calculations to meet certain aspects of the tax code.

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

 

[pb4uski]

That is also how TurboTax does the calculation.

4.97% for us this year

Marginal tax bracket 24%

8.46% effective rate... would be zero without Roth conversions.

Tax divided by Roth conversions is 11.45%. Non-Roth conversion income is about equal to standard deduction and contributions deduction, so Roth conversions are principally a mix of 10% and 12% tax brackets.

 

[Alan]

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

8.46% effective rate... would be zero without Roth conversions.

Tax divided by Roth conversions is 11.45%. Non-Roth conversion income is about equal to standard deduction and contributions deduction, so Roth conversions are principally a mix of 10% and 12% tax brackets.

I think that would be the same as myself if I didn’t have any Roth conversions.

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.