What If

These are probably the most important pages on this website!

We are all used to telling our employer how many exemptions we have so they can make the proper tax deductions during the year. For most of us the first time we look at our potential taxes is in January of the following year when we get our W-2s in the mail.

We can do basically the same thing during retirement, but now that we have seen what our Personal Tax Hump looks like and realize that we can save thousands of dollars each year if we avoid those extreme marginal tax rates, we should all consider doing the opposite! Start doing your tax calculation this January, not next January, and keep asking yourself What If every time you decide to create extra taxable income!

Use the following links to examine the details of each of these
What If situation that you could be facing during your retirement.

  • You prepared properly for year end unexpected income.
    • 22.2% You received a taxable bonus or short term gains.
    • 10.2% You received some long term capital gains.
  • You did not prepare for year end gains and some of your income was LTCGs
    • 49.95% You received a taxable bonus or short term gains.
    • 37.95% You received some long term capital gains.
  • You did not prepare for year end gains and none of your income was LTCGs
    • 40.7% You received a taxable bonus or short term gains.
    • 33.7% You received some long term capital gains.
  • Break Even Detailed examples after Federal, State, and Local taxes.
  • QCD Detailed example of a Qualified Charitable Distribution.

What If you take a Long Term Gain within your Sweet Spot?
Iím not a tax accountant, so use everything on this page at your own risk!

The actual $1,000 of Long Term Capital Gains was not pushed into its taxable position, so the gains themselves were not taxable income. But, those gains were included in the Basis for the taxation of your Social Security benefits, so 85% of the $1,000, or $850 of your Social Security benefit did become taxable income at 12% which raised you taxes by $102, which is a Marginal Tax Rate of 10.2% of the original $1,000 withdraw!