Poll: Your "average" federal tax rate FY 2024

[pjigar]

I keep an eye on my average tax rate after I file a tax return. Mostly for fun but also to investigate if there is any way I can reduce the average rate if it goes too much out of the norm.

Please notice that this poll is asking for "average" federal tax rate rather than marginal tax rate. Average tax rate = (Total Federal Tax)/(Adjusted Gross Income - Form 1040 Line 11). This poll is open for everyone: retired or w*rking.

 

[Mark1]

Last year (2024) the rate was 14%, but the plan for 2025 is only 5.4% since I'm maximizing some capital gains at 0% this year.

 

[jebmke]

Have not started our tax return yet but my estimate in January is about 10%

Your metric misses any income that is not reported on the 1040 that has a 2024 tax of zero. So I'd guess that for many people, this metric is overstated.

 

[mrfeh]

I keep an eye on my average tax rate after I file a tax return. Mostly for fun but also to investigate if there is any way I can reduce the average rate if it goes too much out of the norm.

Please notice that this poll is asking for "average" federal tax rate rather than marginal tax rate. Average tax rate = (Total Federal Tax)/(Adjusted Gross Income - Form 1040 Line 11). This poll is open for everyone: retired or w*rking.

This is generally referred to as effective tax rate.

 

[aja8888]

Single guy - high taxes.

 

[aaronc879]

Single guy - high taxes.

Single guy - Zero taxes. I would love to trade with you.

 

[RunningBum]

I keep an eye on my average tax rate after I file a tax return. Mostly for fun but also to investigate if there is any way I can reduce the average rate if it goes too much out of the norm.

Please notice that this poll is asking for "average" federal tax rate rather than marginal tax rate. Average tax rate = (Total Federal Tax)/(Adjusted Gross Income - Form 1040 Line 11). This poll is open for everyone: retired or w*rking.

Why would you base that decision on average rate rather than marginal?

My average rate is in the <3% range. My marginal is 12%. I have a certain amount of control of taxable income with Roth conversions. I can't go much lower but I would like to convert as much of my IRA as makes sense.

If I converted another $1000 I'd still be in that <3% range. Sounds great, right?

If I converted another $10,000 I'd next in the 3-6% range. Still good, probably not "out of the norm", whatever that means. What is my norm? Would I compare it to the mix of people here, some of whom are still working and a few of those in their peak earning years?

However, my marginal rate for that extra $1K or $10K is 27%. That is a higher marginal rate than I expect to ever have the rest of my life, so it's clear to my I should not do those extra conversions, even though my average rate still seems attractive.

Do what you want. Look at the results for fun, but if anyone is making decisions based on their average tax rate, they are doing it wrong.

(In the e-r.org spirit of nitpicking polls, I could check the <40% box or another other except the first and last choices and be correct.)

 

[aja8888]

Single guy - Zero taxes. I would love to trade with you.

What's pushing me up besides tax rates for singles is having to pull RMDs and collect SS at the same time. No pension, but not complaining.

 

[Midpack]

Voted, but 2024 was my last year of aggressive Roth conversions to the top of the MFJ 22% bracket or IRMAA 1.4X threshold. It’ll be lower beginning in 2025 and thereafter.

 

[Born2Fish]

0% for me.

Roth conversions, DW still on ACA.

 

[2017ish]

Less than 21%--attributable to fairly substantial Roth conversions, albeit less than in the past. Might see quite a drop beginning with the 2025 tax year--particularly if reconciliation extends the present tax bracket structure for another 8 years. That would remove a big factor favoring our aggressive conversions.

 

[HFWR]

TP/AGI = 7.12%

 

[Winemaker]

Too D&^$ much!

 

[Trailwalker]

Managing my ACA subsidy, so I was at zero for '24 and hope to be at zero for '25. After that, and the start of Medicare, I promise to start chipping in.

 

[Fermion]

Managing my ACA subsidy, so I was at zero for '24 and hope to be at zero for '25. After that, and the start of Medicare, I promise to start chipping in.

Same. After 65, things don't matter so much. We would be at a 50% "tax" rate if we didn't let the ACA wag the dog so to speak.

 

[N02L84ER]

Ours was less than 3% for 2024. This year will be the last year we need to limit Roth conversions because of ACA PTCs, so starting in 2026 we expect a 10%+ federal tax rate.

 

[scrabbler1]

I was at 3.3% using AGI. It drops to 3.1% using MAGI (for ACA subsidy purposes). I still checked the "under 6%" box because the poll seemed to use x.00% cutoffs.

 

[Dtail]

Managed for the ACA, so 3% for me. 10% for the fiance. Have managed taxes closely during all of retirement.

 

[equakesfan]

2.5% Worked part of the year, wife works part time, no distributions yet

 

[jollystomper]

... Please notice that this poll is asking for "average" federal tax rate rather than marginal tax rate. Average tax rate = (Total Federal Tax)/(Adjusted Gross Income - Form 1040 Line 11). This poll is open for everyone: retired or w*rking.

Using the above formula, our rate for tax year 2024 is 8.5%.

 

[pb4uski]

6.14%. Same as Effective Tax Rate from Turbo Tax instructions page. Top of 12% tax bracket.

If I add non-taxed SS (15%) to the denominator then it reduces it a tad, but still more than 6%.

 

[pjigar]

Why would you base that decision on average rate rather than marginal?

You are right but we know our effective tax ranges from 13-17% historically. If it goes out of wack then I can defer more income and/or not realize too much gains.

 

[pjigar]

FWIW I was expecting double bell curve in the poll results: First bell for retired people and another bell for working people (which is what it looks like so far). I was surprised to see many huddled into 0% range, many be ACA effect.

 

[phil1ben]

I would think you would want MAGI rather than AGI because you would want to include muni bond interest in the denominator. For many, muni bond interest is significant. Just my opinion.

 

[Fermion]

FWIW I was expecting double bell curve in the poll results: First bell for retired people and another bell for working people (which is what it looks like so far). I was surprised to see many huddled into 0% range, many be ACA effect.

Now I get this picture of the (currently 8) group of us under 60s huddled together in the 0% range with a little sign that says "Will keep MAGI low for ACA" and a tin cup out. The 30% people walking by, keeping a comfortable distance, but dropping a coin in our cup.