The important "trigger" income levels 2020

[gerntz]

I'm depressed.

 

[swakyaby]

I'm depressed.

I’m relieved. I paid all those “special” taxes during my w*rking years —NIIT, Medicare surcharge tax, alternative minimum tax, but not IRMAA (yet). It was one of the best feelings to be finally rid of those costs when FIREd.

 

[finster869]

This is a great thread and should be a "sticky".

 

[38Chevy454]

Thanks Gumby for putting this together, and to the others with the updated numbers. Definitely a good tool for reference and planning purposes.

 

[aja8888]

Gumby, thanks for the effort. I copied it and sent it to a few friends.

 

[Fleur58]

I love to see this calculation done for our Single and Widowed friends here.
Thanks anyway!

 

[marko]

Here's an interesting trigger that I just learned today:
My disabled brother's income is $500 a month over a threshold.

As a result, he must self-pay for a PCA to the tune of about $40K annually. So being over a threshold of $6000 a year forces him to pay $40K; just doesn't seem right. If his income was $6000 lower he'd get the PCA a no cost.

I am investigating this but I'm not sure how far I can get.

Just venting; sorry if I took this on a tangent.

 

[USGrant1962]

Eligibility for the American Opportunity Tax Credit phases out starting at $160K AGI I believe.

 

[Gumby]

Eligibility for the American Opportunity Tax Credit phases out starting at $160K AGI I believe.

Excellent addition to the list. Thanks.

 

[Dtail]

Here's an interesting trigger that I just learned today:
My disabled brother's income is $500 a month over a threshold.

As a result, he must self-pay for a PCA to the tune of about $40K annually. So being over a threshold of $6000 a year forces him to pay $40K; just doesn't seem right. If his income was $6000 lower he'd get the PCA a no cost.

I am investigating this but I'm not sure how far I can get.

Just venting; sorry if I took this on a tangent.

What is a PCA?

 

[marko]

Personal Care Assistant. They do errands, drive you around, help you get dressed, cook meals, help you bathe etc

What is a PCA?

 

[DrBrisket]

OP, thanks for putting this list together. I spent an insane number of hours this week trying to "thread the needle" for a Roth conversion before the EOY.

In the process, I ran across another phase out: For those with kiddos in college that have exhausted the 4 years of the AOTC, there's the Lifetime Learning Tax Credit (LLTC) that phases out for taxpayers with income between $58,000 and $68,000 (single) or $116,000 and $136,000 (MFJ). The income limits are adjusted annually for inflation.

The LLTC is 20% of qualified expenses up to a max tax credit of $2k per taxpayer or dependent per year.

 

[SecondCor521]

I have a similar list to the OP, but mine is for HOH and a family size of 4. Note that for the ACA related items, the FPL numbers change somewhat depending on whether you live in the lower 48, Alaska, or Hawaii.

 

[fatboymike]

I love to see this calculation done for our Single and Widowed friends here.
Thanks anyway!

Subscribed in hope a single and widowed data may be added

Thanks

 

[Midpack]

Great summary, thanks for sharing!

 

[PatrickA5]

OP, thanks for putting this list together. I spent an insane number of hours this week trying to "thread the needle" for a Roth conversion before the EOY.

In the process, I ran across another phase out: For those with kiddos in college that have exhausted the 4 years of the AOTC, there's the Lifetime Learning Tax Credit (LLTC) that phases out for taxpayers with income between $58,000 and $68,000 (single) or $116,000 and $136,000 (MFJ). The income limits are adjusted annually for inflation.

The LLTC is 20% of qualified expenses up to a max tax credit of $2k per taxpayer or dependent per year.

Yep, we're done with AOP in 2019, but DS has another year so we'll be using the Lifetime Learning Credit for 2020. Not as good as the AOP, but still we'll be letting Uncle Sam pay for another $2,000 of college. Over 5 years of credits we will have made use of $12,000 of credits, plus a decent amount of taxable earnings saved using 529 savings. Thanks, Uncle Sam!

 

[Gumby]

I have added the lifetime learning credit, recalculated the social security taxation levels to fix my earlier math error and made a list for single filers. As always, corrections or additions are welcome.

 

[madsquopper]

This is incredibly helpful, although in our case (both retired but spouse has a hefty pension) our options are somewhat limited. I was hoping to do some IRA to Roth conversions over the next 4-5 years but it looks like we get bit in the ass one way or another between the different threshold types. Worst case is we'll try to stay below the 218K level.

I ran a boatload of simulations (both online and my own spreadsheet) for when to take Social Security and Roth conversions, and in the end it really didn't make a huge amount of difference in end-of-year portfolio value over the long haul (a few percent one way or another). So no point in stressing out in order to squeeze every last dollar, as we have more than enough to have a good life for the next 30-40 years.

 

[Done]

The important "trigger" income levels 2020

For those using the Qualified Business Income (QBI) deduction under Section 199A, such as rental property owners operating as a pass-through business, this deduction is limited or phased-out as taxable income exceeds $321,400 MFJ or $160,700 single. https://www.nolo.com/legal-encyclopedia/the-new-pass-through-tax-deduction.html

 

[shotgunner]

Thank you Gumby for a very informative and useful post, I agree this info should be a sticky. This continues to be a fantastic website with information that has been very helpful to me in my journey from early semi to full retirement.

 

[Chuckanut]

Gumby deserves our praise for putting this information together. It's another example of the useful information one can acquire by being part of this illustrious group.

 

[oldphd]

Another thumbs up to Gumby for putting this together, good idea and a useful resource.

After looking at the numbers for SS, I found myself saying huh? I was surprised at how high the income values for full SS taxation are. I'd always figured if you have $44K of non SS income for MFJ it would all be taxable at 85%. Key point on the form is "up to 85%". As a result of seeing Gumby's numbers, and since I'm entering the timeframe where we have one small SS check and some years before RMD where I'm planning on Roth conversions, I looked into the calculations in more detail.

As others have said, it's difficult to look at the form and understand it. I know I couldn't. Since these calculations include how much SS you get, which is different for everyone, it's also tough to simplify it down to some numbers in a chart.

I've looked around the forum and haven't found a thread on the subject. I'm wondering if there's one out there and I can't find it. Not sure if this thread is the right place to have a discussion, or perhaps start one elsewhere. After spending some time wrapping my mind around how it affects our situation I feel comfortable with how it works, and suffice it to say the reality is different than I expected before this exercise based on my reading of the form without comprehending the underlying equations.

I'm wondering if others would find this useful? Or if it's just too individual to get something that explains it?

 

[Gumby]

Another thumbs up to Gumby for putting this together, good idea and a useful resource.

After looking at the numbers for SS, I found myself saying huh? I was surprised at how high the income values for full SS taxation are. I'd always figured if you have $44K of non SS income for MFJ it would all be taxable at 85%. Key point on the form is "up to 85%". As a result of seeing Gumby's numbers, and since I'm entering the timeframe where we have one small SS check and some years before RMD where I'm planning on Roth conversions, I looked into the calculations in more detail.

As others have said, it's difficult to look at the form and understand it. I know I couldn't. Since these calculations include how much SS you get, which is different for everyone, it's also tough to simplify it down to some numbers in a chart.

I've looked around the forum and haven't found a thread on the subject. I'm wondering if there's one out there and I can't find it. Not sure if this thread is the right place to have a discussion, or perhaps start one elsewhere. After spending some time wrapping my mind around how it affects our situation I feel comfortable with how it works, and suffice it to say the reality is different than I expected before this exercise based on my reading of the form without comprehending the underlying equations.

I'm wondering if others would find this useful? Or if it's just too individual to get something that explains it?

This thread http://www.early-retirement.org/forums/f28/calculating-tax-on-ss-benefits-101263.html should be a good place to continue the discussion. You'll find there a link to the IRS worksheet and a link to a third party calculator suggested by pb4uski.

Edit to add: When I calculated the income levels in post 1, I did it by reverse engineering the IRS form, using a married couple with $2k per month each in social security. Then I calculated straight from the top to check my work. The total income levels for 50% and 85% taxation naturally change as you change the amount of the social security payments.

 

[kgtest]

Very informative. Thanks Gumby. It's kinda like the cheat codes for the video game...(or probably more like the instructions that nobody reads)

 

[Katiek]

Thank you! This is a very helpful format