Retirement taxes

[Terryjm51]

If your in the top end of 15% tax bracket WHAT DO YOU PAY IN
The reason I ask I ran turbo tax app and it shows I would get money back every year ? Once I claim short form deductions. What am I doing wrong ? I am figuring 10 to 12 k a year in federal taxes


Sent from my iPhone using Early Retirement Forum

 

[jwkde]

might need a bit more information.

keep in mind that LT capital gains and Qualified dividends are taxed differently than regular income

 

[hnzw_rui]

For 2015, under age 65.

Single
Standard Deduction: 6,300
Exemption: 4,000
AGI Limit 15% Bracket: 47,750
Tax at AGI Limit: ~5,156.25

Married Filing Jointly
Standard Deduction:12,600
Exemption: 8,000
AGI Limit 15% Bracket: 95,500
Tax at AGI Limit: ~10,312.50

That makes for effective tax of around 10.8%. Not sure what the exact taxes are since the IRS rounds it off per tax table but it should be pretty close. For folks older than 65, I believe the standard deduction is $2K higher (per person?) so just increase the AGI limits by that amount.

 

[gauss]

Aw Man, Are they talking about taxing retirement now? (just kidding)

 

[user5027]

For 2015, under age 65.

Single
Standard Deduction: 6,300
Exemption: 4,000
AGI Limit 15% Bracket: 47,750
Tax at AGI Limit: ~5,156.10

Married Filing Jointly
Standard Deduction:9,250
Exemption: 8,000
AGI Limit 15% Bracket: 95,100
Tax at AGI Limit: ~10,312.35

That makes for effective tax of around 10.8%. Not sure what the exact taxes are since the IRS rounds it off per tax table but it should be pretty close. For folks older than 65, I believe the standard deduction is $2K higher (per person?) so just increase the AGI limits by that amount.

The Married Filing Jointly Standard Deduction is 12,600 not 9,250.

In 2015, Various Tax Benefits Increase Due to Inflation Adjustments

 

[JoeWras]

Aw Man, Are they talking about taxing retirement now? (just kidding)

They are in Illinois.

... kind of

"llinois is leaving $2 billion on the table by not taxing retirement income, studies have shown. That missed revenue is escalating every year. Total retirement income in Illinois is growing by 6.5 percent a year, compared with just 1.9 percent annual growth for personal income

 

[FiveDriver]

I find the TaxCaster on TurboTax to be helpful in estimating taxes. Especially useful for maxing out a Roth Conversion.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

 

[MichaelB]

They are in Illinois.

... kind of

A short description or snippet of the linked article would be helpful to members.

 

[steelyman]

I notice the article that JoeWras posted is dated August 2014, which was pre-election. The new IL governor is Rauner.

 

[JoeWras]

A short description or snippet of the linked article would be helpful to members.

OK, sorry. I normally am very logical, this time I was being a smart alec. One of my poor attempts at being short, not my usual style. I have work to do.

The article is by a Chicago business writer who thinks that the fact that Illinois does not tax retirement is a terrible thing, and that Illinois should consider taxing it to get more income.

"llinois is leaving $2 billion on the table by not taxing retirement income, studies have shown. That missed revenue is escalating every year. Total retirement income in Illinois is growing by 6.5 percent a year, compared with just 1.9 percent annual growth for personal income"

I notice the article that JoeWras posted is dated August 2014, which was pre-election. The new IL governor is Rauner.

As I was saying, they are just "talking" about it. This is a 3rd rail issue and I have no idea where it is going. Although be aware, other states are more than happy to tax retirement income just fine.

 

[hnzw_rui]

The Married Filing Jointly Standard Deduction is 12,600 not 9,250.

In 2015, Various Tax Benefits Increase Due to Inflation Adjustments

Whoops, my mistake. Got crosseyed with Head of Household. Apparently, I was also using the 2013 standard deduction in my spreadsheet (12,200). AGI Limit is supposed to be 95,500 (12,600 + 8,000 + 74,900).

 

[travelover]

.............
"llinois is leaving $2 billion on the table by not taxing retirement income, studies have shown. That missed revenue is escalating every year. Total retirement income in Illinois is growing by 6.5 percent a year, compared with just 1.9 percent annual growth for personal income"


As I was saying, they are just "talking" about it. This is a 3rd rail issue and I have no idea where it is going. Although be aware, other states are more than happy to tax retirement income just fine.

Until a few years ago, Michigan did not tax pensions. Now they have a 3 tier tax based on how old you are. One more thing that I will not miss when I move.

 

[N02L84ER]

Terry, if most of your income is long term taxable gains or qualified dividends, they are taxed at 0% when your total income is within the 15% bracket.

 

[Terryjm51]

I appreciate the reply Sounds like I need to do more home work.
I am still a couple of years away but want understand the details before I fire.
The knowledge in this forum is GREAT.
Thanks


Sent from my iPhone using Early Retirement Forum

 

[CRLLS]

Illinois is one of just three states that exempt pension income from taxation

That may be true but is misleading. According to Kiplinger, 9 states have no income tax at all. I have also read elsewhere that this number is 7 hard to determine the date some articles found on line were published. So while Illinois exempts pensions (and other retirement income), it should be added to those that do not tax any income. When I read misleading statements like this, it is hard for me to believe anything else written in the article. BTW there are 38 states that do not tax SS at all.

 

[JoeWras]

That may be true but is misleading. According to Kiplinger, 9 states have no income tax at all. I have also read elsewhere that this number is 7 hard to determine the date some articles found on line were published. So while Illinois exempts pensions (and other retirement income), it should be added to those that do not tax any income. When I read misleading statements like this, it is hard for me to believe anything else written in the article. BTW there are 38 states that do not tax SS at all.

I stop reading most articles because people are always pushing an agenda, obviously or not.

Been that way forever. (See newspapers circa 1750 in the American colonies.)