Compare 2012 Effective Tax rate?

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Compare 2012 Effective Tax rate?

Postby morphos » Sat Feb 09, 2013 11:45 am

Is anyone interested in comparing effective tax rates for 2012? TurboTax outlines a few easily comparable stats on the first page of your return, and I think many on this board will be submitting their returns soon. I would be pretty fascinated to compare various age groups, retirees and others in similar age groups as I.

I'll go first (The alignment was tricky, feel free to quote and paste your own numbers):

Code: Select all
Adjusted Gross Income   $68,202
Taxable Income          $48,702
Total Tax                $4,977
Total Payments/Credits  $10,110
Amount to be Refunded    $5,133
Effective Tax Rate:       5.87%


Filing status: Married, filing jointly. Him: 31, her 30. 401k contribution by both of 10% and HSA. My spouse is completing her RN and claimed the American Opportunity Tax Credit (HOPE credit) of $2500 for tuition.
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Re: Compare 2012 Effective Tax rate?

Postby RhoRho » Sat Feb 09, 2013 11:58 am

Code: Select all
Adjusted Gross Income:  $58,074.00
Taxable Income:  $34,774.00
Total Tax:  $3,346.00
Total Payments/Credits:  $4,963.00
Amount to be Refunded:  $1,617.00
Effective Tax Rate:  5.76%


Contributing 6% to 401k and an additional $150 per paycheck to HSA. Hoping this makes a dent to our debt.
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Re: Compare 2012 Effective Tax rate?

Postby livesoft » Sat Feb 09, 2013 12:14 pm

Wow, now I've seen everything.

TT says our effective tax rate is 12%.
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Re: Compare 2012 Effective Tax rate?

Postby NYBoglehead » Sat Feb 09, 2013 12:18 pm

While it is important to know your effective tax rate for tax planning and investment purposes, don't be confused that your effective federal tax is what you paid. Throw in another 7.65% for FICA and whatever you paid for state income taxes as well.

That said, for purposes of the Roth/Traditional conversation, knowing your effective federal rate is important.
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Re: Compare 2012 Effective Tax rate?

Postby Aptenodytes » Sat Feb 09, 2013 12:20 pm

11.1%
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Re: Compare 2012 Effective Tax rate?

Postby House Blend » Sat Feb 09, 2013 8:48 pm

NYBoglehead wrote:Throw in another 7.65% for FICA and whatever you paid for state income taxes as well. .


No. Not even close. First of all, it's only 5.65% in 2012.

And it counts as 5.65% only if your only taxable income for the year was wage income, and you had less than $110.1K of it.

The rest of us, either with more than $110.1K in wage income, or at lot more of other flavors of income (e.g., dividends or cap gains or rent) didn't pay anything resembling 5.65% in FICA.

And the self-employed (earning less than $110.1K) paid far more.

My brother hasn't done Mom's 2012 income taxes yet, but her effective tax rate is 0% on maybe $90K-$100K AGI. (And 0% state. And No FICA either.) She'll be getting a refund, since some of her account custodians have been withholding tax on her RMDs.
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Re: Compare 2012 Effective Tax rate?

Postby Userdc » Sat Feb 09, 2013 9:15 pm

26.4%
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Re: Compare 2012 Effective Tax rate?

Postby Gill » Sat Feb 09, 2013 9:47 pm

House Blend wrote:She'll be getting a refund, since some of her account custodians have been withholding tax on her RMDs.

Why are they permitted to do that when it's not required or necessary?
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Re: Compare 2012 Effective Tax rate?

Postby EmergDoc » Sun Feb 10, 2013 2:40 am

The problem is deciding what to use for your denominator. For example, money put into your 401K doesn't show up as Gross income in turbotax, but probably should when figuring out your effective tax rate.

I was 8% last year (federal only) which was the highest it's ever been. It'll be higher this year, but I won't get my K-1s for a couple of months yet so I can't really tell you how much higher. I expect my Federal, State, and payroll to get to around 20% though.
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Re: Compare 2012 Effective Tax rate?

Postby Carl53 » Sun Feb 10, 2013 5:11 am

Mine was 8.56%, but TT does not include any medical or similar pretax deductions, 401k contributions/match, tax exempt interest, nor TIRA contributions, nor any Roth earnings, nor any of a number of misc adjustments allowed on your 1040 in the denominator. The percentage would be much smaller had they included these. TT had access to all of this information (other than Roth earnings) had they chose to include it.
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Re: Compare 2012 Effective Tax rate?

Postby MarkBarb » Sun Feb 10, 2013 7:51 am

20.85%
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Re: Compare 2012 Effective Tax rate?

Postby House Blend » Sun Feb 10, 2013 8:12 am

MBMiner wrote:
House Blend wrote:She'll be getting a refund, since some of her account custodians have been withholding tax on her RMDs.

Why are they permitted to do that when it's not required or necessary?
Bruce


She was still managing her own finances ~10 years ago when RMDs started. And was not in the 0% bracket. And I presume she checked the boxes for "make my RMD withdrawals automatic" and "please withhold income tax".

Now, she is no longer able, and my brother has POA. No doubt he could fix it, but it isn't a high priority. (At Vanguard, we do it manually, but she also has tax-deferred accounts at 4 insurance companies.)
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Re: Compare 2012 Effective Tax rate?

Postby Igglesman » Mon Feb 18, 2013 8:36 am

Adjusted Gross Income $ 97,592.00
Taxable Income $ 78,092.00
Total Tax $ 2,032.00
Effective Tax Rate 2.08%
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Re: Compare 2012 Effective Tax rate?

Postby MnD » Mon Feb 18, 2013 10:00 am

28.3% as a % of AGI

Federal 17.0%
FICA 5.5% (employee share)
State 3.4%
Property 1.3% (real estate and personal property tax on autos)
Sales 1.1% (from IRS estimator)
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Re: Compare 2012 Effective Tax rate?

Postby Alex Frakt » Mon Feb 18, 2013 10:14 am

livesoft wrote:Wow, now I've seen everything.

There's a whole world of personal finance bloggers out there who delight in showing every penny earned and spent. I imagine it helps with fiscal discipline if you know that 10s (100s, 1000s) of people will be reviewing your expenditures. Bogleheads is a logical next step once they've cleared up their credit card debts. So get ready for the oversharing :-)
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Re: Compare 2012 Effective Tax rate?

Postby awval999 » Mon Feb 18, 2013 10:15 am

I don't think using AGI is appropriate here because 401k contributions don't show up as wages and thus aren't accounted for.
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Re: Compare 2012 Effective Tax rate?

Postby market timer » Mon Feb 18, 2013 10:29 am

24% Federal--does not include FICA or state/local.
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Re: Compare 2012 Effective Tax rate?

Postby MnD » Mon Feb 18, 2013 12:18 pm

awval999 wrote:I don't think using AGI is appropriate here because 401k contributions don't show up as wages and thus aren't accounted for.


Totally appropriate to exclude in my opinion.
It's deferred compensation that by law must be placed in a trust account. At some point that compensation will exit the trust, be realized to you as taxable income and will, along with other realized income contribute to an effective and marginal tax rate in that future year. For FICA I would agree, you would want to add that in the denominator to get an accurate effective FICA %.
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Re: Compare 2012 Effective Tax rate?

Postby MN Finance » Mon Feb 18, 2013 12:34 pm

Code: Select all
Adjusted Gross Income   $202,000
Taxable Income          $127,000
Total Tax                $23,800
Effective Tax Rate:       11.69%


Interesting that a decent income is only at an effective 12%, plus state / local / FICA. Not counting sales tax, state local and FICA makes this 22%. Not into politics but paying less than 25% in total taxes seems like a pretty reasonable rate (though I suspect we have above average itemization numbers, but not sure).
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Re: Compare 2012 Effective Tax rate?

Postby livesoft » Mon Feb 18, 2013 12:44 pm

^ That's all very reasonable. It seems that around $200,000 income is a sweet spot where a family has enough to take advantage of all kinds of investments AND tax breaks AND tax credits. We had a thread about that: Taxes on a family with $200,000 gross income that got locked for (I think) dubious reasons.

However, such a family may be in a 45% marginal income tax bracket because of loss of tax credits for each additional bit of income.
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Re: Compare 2012 Effective Tax rate?

Postby MN Finance » Mon Feb 18, 2013 6:23 pm

I think that we had about $250 in credits, so that was a pretty straight tax calculation. The AGI included $6k in short term cap gains and was net of one 401k max. We itemized about $50k which was $12k mortgage, $4k RE taxes, $9k state taxes, and remainder charitable.
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Re: Compare 2012 Effective Tax rate?

Postby Peter Foley » Mon Feb 18, 2013 6:37 pm

11.95% in 2012, 17.09% in 2011. I think I need a better accountant. :confused
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Re: Compare 2012 Effective Tax rate?

Postby Chan_va » Mon Feb 18, 2013 7:08 pm

19.6% excluding FICA. Maybe I should switch to the flat tax camp.
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Re: Compare 2012 Effective Tax rate?

Postby Bill M » Mon Feb 18, 2013 9:16 pm

26.84%
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Re: Compare 2012 Effective Tax rate?

Postby interplanetjanet » Mon Feb 18, 2013 11:06 pm

livesoft wrote:^ That's all very reasonable. It seems that around $200,000 income is a sweet spot where a family has enough to take advantage of all kinds of investments AND tax breaks AND tax credits.

If the family has two married parents, yes. If you are a divorced parent with custody of your dependent children, it's a pretty bad place to be - you hit AMT even if you max out a 401k, contribute to a FSA and don't itemize, and you are phased out of nearly everything.
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Re: Compare 2012 Effective Tax rate?

Postby gd » Tue Feb 19, 2013 8:56 am

TurboTax says 3%, but as with your numbers, I don't see where it gets that from. My calculation of fed tax/AGI is 3.5%.

Including all state and property taxes, but excluding SS and Medicare since I consider those more insurance payments, and excluding state sales tax since I have no clue how much I spend on that, it's under 12%. Throw in sales tax, remove some hidden tax treatments such as depreciation and rental costs to try to get an absolute all-taxes-paid-anywhere effective rate, it'd probably still be under 15%.

Retired (not receiving SS or Medicare), wife works in low-paying job, in 15% federal bracket.
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Re: Compare 2012 Effective Tax rate?

Postby Chicago60 » Tue Feb 19, 2013 9:26 am

26.5% not including social security, medicare, or state tax.
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Re: Compare 2012 Effective Tax rate?

Postby MnD » Tue Feb 19, 2013 10:57 am

livesoft wrote:^ That's all very reasonable. It seems that around $200,000 income is a sweet spot where a family has enough to take advantage of all kinds of investments AND tax breaks AND tax credits. We had a thread about that: Taxes on a family with $200,000 gross income that got locked for (I think) dubious reasons.

However, such a family may be in a 45% marginal income tax bracket because of loss of tax credits for each additional bit of income.


Very skeptical based on my own return. At that income level (married, two kids) pretty much all the lower and middle class tax breaks (savers credit, college cost credits and deductions, student loan interest deduction, child tax credit, 0% cap gains, direct Roth eligibility, and EITC of course) are all long gone. I'm not aware of _anything_ that is actively phasing out for a family around $200K MAGI, in fact for us it's a very clean "middle of the 28% bracket" marginal rate for federal. We get the basic deductions when itemizing and none of the "rich" taxes, phase-outs or take-backs.
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Re: Compare 2012 Effective Tax rate?

Postby papito23 » Thu Mar 07, 2013 10:07 pm

Finally got mine calculated...

-24.83% combined Fed+State. -20.13% after FICA.

Anyone else here "in the red"? I suspect very few...
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Re: Compare 2012 Effective Tax rate?

Postby Bob's not my name » Wed Mar 27, 2013 8:36 am

30% of AGI in federal and state income taxes and payroll taxes vs. 0.5% for elderly multi-millionaire whose taxes I prepare, but hey, pay taxes now and go Roth!
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Re: Compare 2012 Effective Tax rate?

Postby chipmonk » Wed Mar 27, 2013 7:25 pm

My effective Federal tax rate for 2012 is 17.84% (28% bracket).

My rate is higher than most of you, it seems, despite itemized deductions, $3k capital loss carryover, and very tax-efficient investment holdings, with almost zero interest-bearing cash accounts and no Federally-taxable bonds in taxable accounts :(.

I think Turbotax's "effective" tax rate might be a bit misleading because it only counts taxes against your AGI, which will be reduced if you have tax-deferred contributions (maxed-out 401k and HSA in my case). If I add my pre-tax 401k and HSA contributions back to my AGI--ignoring the fact that I will get taxed on them many years down the road--then I'm down to a Federal tax rate of ~15%.
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Re: Compare 2012 Effective Tax rate?

Postby bdpb » Thu Mar 28, 2013 8:22 am

chipmonk wrote:I think Turbotax's "effective" tax rate might be a bit misleading because it only counts taxes against your AGI, which will be reduced if you have tax-deferred contributions (maxed-out 401k and HSA in my case). If I add my pre-tax 401k and HSA contributions back to my AGI--ignoring the fact that I will get taxed on them many years down the road--then I'm down to a Federal tax rate of ~15%.


One should also include any company provided health insurance premiums, life insurance and 401k company contributions. All generally provided to folks in the higher marginal brackets, not so much to folks in the lower brackets.
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Re: Compare 2012 Effective Tax rate?

Postby interplanetjanet » Thu Mar 28, 2013 6:46 pm

Mine's over 20% for state+federal / gross, comfortably. Factoring in payroll taxes, almost 25%. This is after maxing out my 401k, taking advantage of FSAs, etc.

AMT hits reasonably well-earning single parents very hard.
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Re: Compare 2012 Effective Tax rate?

Postby acegolfer » Thu Mar 28, 2013 8:15 pm

Fed: 8.9%
State: 0%
SS/Med: 4.4%
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Re: Compare 2012 Effective Tax rate?

Postby AQ » Thu Mar 28, 2013 9:02 pm

27.87% by TT. Maybe I need a live accountant instead of TT?
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Re: Compare 2012 Effective Tax rate?

Postby kingsnake » Thu Mar 28, 2013 9:18 pm

26.1% Federal only...hit AMT.
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Re: Compare 2012 Effective Tax rate?

Postby acr123 » Thu Mar 28, 2013 10:22 pm

Primarily self-employed income.

AGI = $ 83,601 (also had Roth conversion $ 23,427 so Total income $ 100,794 )

Federal = 0%

NY State = 0.58%

Self Employment Tax ( FICA & M/C ) = 7.48%
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