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  • #31
    at least we are consistent ....
    2018 effective 32%, marginal 37%. 2019 effective 32%, marginal 37%

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    • #32
      Originally posted by dennis View Post

      You are correct in saying higher income is "typically" achieved at the expense of paying more in taxes because earned income is the most highly taxed income. That's why getting more passive income is important. The following is an example, not to brag, but, to show how "out of the box" thinking can get better results. This year we took 2 separate IRA distributions totaling $1.5M and will pay NO tax on them. How? By purchasing income producing multifamily assets worth $5.7M then using cost segregation studies to 100% depreciate the $1.5M this year. This accomplishes removing the $ from the IRA in a manner that we won't have to pay tax on it and avoiding having to eventually get hit with RMDs. The $ immediately goes to work earning us tax advantaged income outside of the IRA. That's making your money working harder for you and not you working harder for the money.
      Honestly, posts like this and some of the other “passive income” articles/posts scare me. But it’s SO simple, isn’t it? And anyone can do it. No luck involved. Trust me.
      Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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      • #33
        Originally posted by jfoxcpacfp View Post

        Honestly, posts like this and some of the other “passive income” articles/posts scare me. But it’s SO simple, isn’t it? And anyone can do it. No luck involved. Trust me.
        I never said it was simple but it can be done with appropriate education. I've been involved in multifamily for 15 yrs and have made plenty of mistakes. Anyone in real estate that tells you otherwise isn't being honest. You have to learn from the mistakes and move on and and not make the same mistake again.

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        • #34
          2019 1040:

          Line 16 (total tax) / line 7b (total income) = ~17.64%.

          If I don't count real estate depreciation then ~15.73%.
          "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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          • #35
            Effective 32%. Doesn't seem low to me.

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            • #36
              I am retired. My effective rate will be primarily dividend/capital gains.

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              • #37
                Effective: 28.99% federal, 9.28% state. Per TurboTax.

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                • #38
                  Originally posted by WealthyDoc View Post
                  I think income tax rates are quite low now. Everybody loves to complain about paying taxes. But I have paid more in the past and likely will pay a higher rate in the future. If I had any traditional retirement money I would consider converting to ROTH IRA.

                  My effective tax rate (Federal) for 2019 was only 17% And that is despite a generous specialty income and a lot of other streams of income.

                  How about you guys? Did you pay a similarly low rate? Care to share your rate or tips on how to lower it?
                  I used to pay something similar on my doctor income. I pay in the mid 30% range now. First world problems...

                  Biggest deductions used to be retirement accounts. Now it is the QBI deduction.
                  Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                  • #39
                    32% marginal. 16.7663299573915% effective. And I'm CERTAIN those are entirely significant digits

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                    • #40
                      13.2% Tax rate for this Resident.

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                      • #41
                        My accountant finally sent me my 2019 returns for review. They have been swamped with PPP forgiveness calculations and more. I’m in an unusual tax situation given the tax cliff in my state when income passes a certain threshold.

                        My highest combined state and federal marginal income tax rate for an additional dollar of income is a whopping 117%. Not much of an incentive to work, is it? For each additional dollar of income, I have the privilege of paying $1.17 in additional taxes.

                        That 117% combined marginal rate goes down once I hit the bottom of the state tax cliff, to a relatively speaking quite modest combined marginal rate of 45.8%.

                        Effective income tax for 2019 was 43% combined, with effective federal of 34.2%, state 8.8%.

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                        • #42
                          Originally posted by White.Beard.Doc View Post
                          My accountant finally sent me my 2019 returns for review. They have been swamped with PPP forgiveness calculations and more. I’m in an unusual tax situation given the tax cliff in my state when income passes a certain threshold.

                          My highest combined state and federal marginal income tax rate for an additional dollar of income is a whopping 117%. Not much of an incentive to work, is it? For each additional dollar of income, I have the privilege of paying $1.17 in additional taxes.

                          That 117% combined marginal rate goes down once I hit the bottom of the state tax cliff, to a relatively speaking quite modest combined marginal rate of 45.8%.

                          Effective income tax for 2019 was 43% combined, with effective federal of 34.2%, state 8.8%.
                          Thanks for the follow up. What an odd state tax structure! I live in MD, which has a relatively high rate but the structure is at least rational.

                          As an aside, I paid my taxes in April because the extra interest from waiting until July was not going to make that much difference and the Comptroller said taxes paid after the original date would have to be paid electronically. (I still file by paper and did not want to redo the submission.) Your post reminded me to look at my account. The state just cashed the check last week. So, a rational structure but not an efficient system. I guess it is all noise in a year where government action destroyed millions of jobs. I suspect all of us know where tax rates are going next year.

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                          • #43
                            Originally posted by White.Beard.Doc View Post
                            My highest combined state and federal marginal income tax rate for an additional dollar of income is a whopping 117%. Not much of an incentive to work, is it? For each additional dollar of income, I have the privilege of paying $1.17 in additional taxes.

                            That 117% combined marginal rate goes down once I hit the bottom of the state tax cliff, to a relatively speaking quite modest combined marginal rate of 45.8%.

                            Effective income tax for 2019 was 43% combined, with effective federal of 34.2%, state 8.8%.
                            Wow. ************************. How "deep" dollar wise into 117% are you?
                            "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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                            • #44
                              Originally posted by Cubicle View Post

                              Wow. ************************. How "deep" dollar wise into 117% are you?
                              I went back to the state tax calculator by putting in different income figures as a test. Initially I made an error on my state marginal rate at the tax cliff. It is even higher than I though. For an extra $5,000 in income over the high income threshold, I pay $4,687 extra in state taxes. That works out to 94% on each additional dollar earned once I go over that tax cliff. And the feds tax at 37%. So the total combined income tax on $5,000 is actually $6,537, or 131%, or $1.31 for each dollar of additional earnings (I did not count the medicare taxes, which would make it even higher). And then once the state gets you up to the 8.82% for your total income all the way back to your first dollar earned by taxing you at 94%, then the state marginal rate goes back down to 8.82% for further additional earnings.

                              I think I won the prize for the highest marginal rate at 131%. I am doubtful that anyone can top that. I know there are many strange phase outs buried in the tax codes that can lead to high marginal rates, but this takes the prize for crazy tax law.

                              The stated purpose of the state tax cliff is to claw back more taxes from higher income earners. They go back to your first first dollar earned and then recalculate your tax at the highest rate for every single dollar of earnings. Through this process they remove the graduated, lower marginal rates on your initial dollars earned for the year once you go over that high income threshold.

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                              • #45
                                “tax benefit recapture”

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