What If

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 need more cash beyond your Sweet Spot limit?
I’m not a tax accountant, so use everything on this page at your own risk!

40.7% is the extremely high marginal tax rate that most of us will face during our retirement. Your pre-What If is at or already in the 22% Federal Tax Bracket. The extra $1,000 of taxable income also increase the Basis for the taxation of your Social Security benefits which increases the your Taxable SSB by an additional $850. Your AGI and Taxable income increases by the total of $1,850 which increase your Total Tax Due by $407 at the 22% Federal Tax Rate.