.“I feel similarly to @IxnayBob’s father. In some years, I pay lots of tax. I feel as if I am paying for the right to live in a country that has allowed me to be successful. But, I do wish the money I’m paying would go toward improving our educational and physical infrastructure to make our population more competitive.”
I suspect that IxnayBob’s dad would not have been so excited about paying taxes if he was paying at the highest tax rate, with his taxes going to politicians pet projects and to bribe their constituents to keep voting them in office. And then being told he wasn’t paying his fair share…
@busdriver11 I think the way our population will become more competitive is by having strong families - mom/dad and offspring, and the family is involved with the kids growing up and doing well. The family dysfunctions draw away time and energy away from focusing on ‘how are the kids doing’ and also causing the kids to have various stresses early in life from family dynamics.
Yes it is great when our educational and physical infrastructure is improved with the taxes. Eliminate waste, unnecessary frills, and fraud.
Strong family dynamics also helps with aging parents, various crises, etc. We can have a much stronger middle to upper middle class, which is a key factor with how our country is successful - people can start businesses, work hard and achieve in this country.
A good move many years ago was the reduction of capital gains tax.
A concern within our country is the national debt level - there is a lot of tax money being spent to pay the interest to countries like China that are big bond holders. Grant it, we do have a strong economy, and they are balancing interest rates and monetary fund levels to help maximize our economic success.
Enjoy the info the retirees on this thread share, as they probably are keeping a closer watch on the nest egg and all the external factors that can affect it. Spending time investigating to affirm the status quo.
For some people, it may be a good idea to set up a charitable trust account to sweep the extra amount into it to avoid springing into the top tax rate. At least you have some control where your money goes.
Donor advised funds are generally cheaper than setting up your own trust and allow you to designate any recognized charity and have the custodian send them a check–with your contact info or anonymously (whichever you prefer). It is definitely something to consider for folks who rather donate than pay extra taxes.
Just depends on the individual and what their druthers are. If they plan to donate anyway, that could be a good signal that they have more “on the table” that they can designate for charitable purposes. If they move money into a donor advised fund, they can take the full deduction in the year they transfer the asset and then parcel out the donations as they see fit, per the rules of the custodian.
I agree that the marginal tax rate is important and relevant to many financial decisions. The ACA subsidy is reduced as income increases, roughly at 15% around the $35,000 income level (for 2), then drops to 9.5% from $45k until it disappears. Economically, the loss of that subsidy (call it a “tax credit” if you like) is the same as a tax. But if you add that 15% marginal tax to social security tax of 6.2%, and a 5.75% state tax (here in NC), even using a federal tax bracket of 10% that adds up to… a 35% marginal tax rate. If you get to the 15% federal rate your marginal tax rate is 40%, so the high overall marginal tax rate affects not only high earners.
Looking ahead - we are 62 this year - when we get to age 70 we will start receiving social security. At the same time we will be required to make IRA withdrawals (RMD). I am thinking we will have a fairly high taxable income at that point, and moving to a no state income tax state will at least have to be considered.
I understand you need to take all considerations, including taxes, into account when ,along investment decisions. But that’s not the same as giving away money to avoid hitting the metric that puts you iinto a different bracket.
The reason I asked the question about avoiding higher income brackets is because I was wondering, from several comments people have made throughout this thread, if anyone was under the fallacy of the top bracket Rate applying to the whole. My BIL believes that. I don’t know exactly what he makes but he indicated he makes at least $300,000. My H and I cannot get him to understand tax brackets. He is convinced that once he breaks into a higher bracket, his whole income is subject to the higher rates. He constantly says that if he gets a raise, he’ll pay more in taxes than the amount of the raise. He just doesn’t get the concept.
Actually, to a certain extent, he might be right in a way. It used to be that the more you made, the higher the tax rate. These days, it seems It’s the reverse.
Edited to add: qualified dividends and LT cap gains are taxed at lower rates (along with other income items). So, most people who have those have to use (or their accountant uses) the Schedule D tax calculation worksheet:
AttorneyMother, one would think so. But some people prefer to be aggrieved rather than informed. There are people so upset about government taking their stuff, they just don’t want to hear that the government doesn’t take as much as they feel it takes.
“Actually, to a certain extent, he might be right in a way. It used to be that the more you made, the higher the tax rate. These days, it seems It’s the reverse”
How’s that? Isn’t 39.6%>35%>28%>25%>15%>10%>getting an earned income credit, allowing no federal taxes to be paid? Especially when the AMT and loss of deductions is applied.
Or are you talking about high income people who are able to only get unearned income, paid at the lower capital gains rate?
I don’t think I’ve read anyone on here claiming that they pay their entire income at the top tax rate, but maybe I missed the posts.
" Looking ahead - we are 62 this year - when we get to age 70 we will start receiving social security. At the same time we will be required to make IRA withdrawals (RMD). I am thinking we will have a fairly high taxable income at that point, and moving to a no state income tax state will at least have to be considered."
@NJres, I’m sure you’ve looked at this closely, but have you considered taking your social security as soon as possible instead? If right now you are getting a very low income, that social security would be taxed at a very low rate, allowing you to keep more of it. If you are going to have to take high RMD’s at age 70, you are going to have to pay far more taxes on the social security. How do the numbers work out for that?
Perhaps they don’t like the way the government spends their money.
That’s not probably the whole picture. Depending on the wife’s income, after taxes, paying for childcare, costs for work wardrobes, transportation etc, the net may not be worth it, like having kids being in daycare all day. I’ve never heard of a man preventing his wife from making more income for the family.
I personally know quite a few young professionals making well into 8 figures (all earned income) and only taking standard deductions.
Cbreeze, you know quite a few young people who make over $10 million a year and don’t pay state income taxes, property taxes or have charitable contributions that add up to a little over $12,000+ a year if they are married and $6,000+ a year if they are single?
@NJres Have you considered moving your money from your tIRA to a Roth yearly before you reach 70? Ed Slott recommended that so it would lower your RMD and possibly your taxes too since you are spreading it out over more years than the required years per RMD rules.
@busdriver11 NJres, I’m sure you’ve looked at this closely, but have you considered taking your social security as soon as possible instead? If right now you are getting a very low income, that social security would be taxed at a very low rate, allowing you to keep more of it. If you are going to have to take high RMD’s at age 70, you are going to have to pay far more taxes on the social security. How do the numbers work out for that? - This is a really good point too!
