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Kal1981 wrote: ↑Mon Mar 27, 2023 10:30 pm When you do 401k Roth conversion in retirement, do you usually do it in big chunks or can/should you do small amounts? I assume you always want to go as high as possible within the tax bracket? My spouse will still be employed when I retire and I’m trying to figure out how to do the conversion properly.

Using marginal tax rate instead of "tax bracket" is more likely to give you what you want.

You can calculate marginal tax rates by changing your Roth conversion amount in any Tax estimation tool or commercial software that fits your situation and doing the (change in tax)/(change in income) calculation yourself, or use something like the personal finance toolbox (if you can use Excel) that does so automatically.

P&C actuary wrote: ↑Tue Mar 28, 2023 12:36 pm The wiki section on HSA "https://www.bogleheads.org/wiki/Health_savings_account" needs a correction for contribution limits.

Contribution limits
The 2022 annual limit is $3,650 for an individual plan and $7,300 for a family plan,[4] and the 2022 annual limit is $3,850 for an individual plan and $7,750 for a family plan,[5]

The second 2022 should be 2023.

Done, thanks.

exodusNH wrote: ↑Mon Mar 27, 2023 11:43 pm Well, if they lend you money at 4% and you can get 5% from a CD, you can maintain liquidity (and potentially reduce capital gains taxes) by taking the payment plan. It's probably worth mapping it out in a spreadsheet.

Good point. Unfortunately, based on Quarterly Interest Rates | Internal Revenue Service, it appears the IRS will be charging 7%.

kurious wrote: ↑Mon Mar 27, 2023 6:25 pm We can pay off the amount by selling funds in our taxable account. Should we do that or are we better off getting on a payment plan? Seems like the plan has an interest rate of 4%. I would much rather sell from taxable and pay it for peace of mind.

As already mentioned, what you did is unlikely to end up being a huge net negative, and might even end up favorable. See the “Traditional plus taxable” vs. Roth section of the t vs. R wiki for details.

If you won't incur much capital gain to sell from taxable, that is probably best. In effect you will have moved the conversion tax amount from traditional to Roth.

The MMM spreadsheet may be useful but I was hoping to find something a bit more transparent. It's too hard for me to jump around to the different cells to figure out how what the spreadsheet's doing. (I guess they never heard of named ranges.) Yes, that one is definitely function over form. I've used it enough to be reasonably familiar with what it does, or you could ask in the thread where updates are posted . What is it that you want to do but are having difficulty doing? I really don't care what the inital subsidy is that reduces the insurance premium. I'm looking for the total subsidy including the tax credit received when filing taxes at the end of the year. Apparently only the two spreadsheets among the Tax estimation tools covered i...

spammagnet wrote: ↑Sun Mar 26, 2023 9:33 pm I understand the ACA fiscal cliff is not currently a thing, but is there sweet spot to look for? Is there a calculator to help with this? Excel would be ideal.

In that case, see Roth Conversion and Capital Gains On ACA Health Insurance.

The Using a spreadsheet portion of the Roth IRA conversion wiki, and Roth Conversion with Social Security and Medicare IRMAA also have various screen shot instructions that might be helpful for using that spreadsheet.

daleddm wrote: ↑Sun Mar 26, 2023 5:04 pm A way to think about that maybe, towards making the best decision? Or maybe it really is as simple as pay the least tax possible.

It is almost as simple as pay the lowest tax rate possible (now vs. later) because that provides the highest spendable after-tax amount.

See the Traditional versus Roth - Bogleheads wiki through the "Calculating marginal tax rate now" section. After you are comfortable with the concepts to that point, you can decide how much effort to expend Estimating your future marginal tax rate and thus be able to make an educated guess at what to do now.

That's one of the Tax estimation tools covered in that wiki article.

MrJedi: I don't understand this: "minding the fact that the ordinary income consumes the income thresholds for the preferential qualified dividends and capital gains treatment." Could you explain further please? For example, if your ordinary income is in 24% bracket, then it must be true that your 0% qualified dividends bracket is already filled. Your qualified dividends and long term capital gains tax bracket starts with the dollar after your ordinary income. For 2022, I see all my qualified dividends were taxed at 15%. At what income would they be pushed to 20%? Assuming that toolbox spreadsheet cells N19:P19 are correct, for 2023 the 20% bracket by filing status starts above: Single = $492,300, MFJ = $553,850, and HOH = $523,0...

Rom wrote: ↑Sun Mar 26, 2023 4:36 pm

FiveK wrote: ↑Sun Mar 26, 2023 4:34 pmQuicken.

Is this just a convenient way to view all of your assets and total net worth in one place? Or does it also help you to verify that the contribution and withdrawal amounts are what you expect them to be?

Eliminating the word "just," yes and yes. Opinions may (and, as you can see in this thread, do) vary.

Quicken.

Does that mean that the tax bracket is determined by the amount of income exclusive of qualified dividends ? If so, then my spreadsheet should only have ordinary dividends in it, and I'm free to target a much higher conversion amount? I don't know but would be curious to know the answer without having to reverse engineer the answer through spreadsheet results with varying inputs. Yes, as MrJedi and ofckrupke noted, the 10%, 12%, etc., tax brackets are for "ordinary income" and that does not include long term capital gains and qualified dividends. But one's marginal tax rate is not necessarily the same as one's nominal tax bracket, and it is the marginal tax rate that will affect the advisability of Roth conversion amounts. A nice...

All on the 'Calculations' tab:
- qualified dividends go in D25
- non-qualified dividends, along with interest, go in D23
- the Qualified Dividends and Capital Gain Tax Worksheet is in K3:M31

The Using a spreadsheet portion of the Roth IRA conversion wiki, and Roth Conversion and Capital Gains On ACA Health Insurance and Roth Conversion with Social Security and Medicare IRMAA have various screen shot instructions that might be helpful.

imbogled wrote: ↑Sun Mar 26, 2023 2:05 pm So given this information do I still include section 199a dividends?

The amount of 199a dividends will already have been included in the total for the individual funds, so no you don't add them separately. E.g., see https://www.vanguard.com/pdf/USGOIN_2023.pdf: "To determine the portion of
dividends that may be exempt from your state income tax, multiply the amount of “ordinary dividends” reported in
Box 1a of Form 1099-DIV by the percentage listed in the following table."

You could compare your spreadsheet with the personal finance toolbox spreadsheet. That one will show a chart of your marginal rates, so you can see when the jump to 32% occurs, and compare that with your numbers.

section 199A dividends...amount is included in the amount reported in box 1a of your 1099-DIV, so it appears that "it's in there" already.

JohnSmith123 wrote: ↑Sat Mar 25, 2023 2:25 pm ...how do I divide my dividend and interest income amongst the states?

By the state of residence on the date you received the income is the usual method.

+1 to cchrissyy's comment. OldSport, see the Safe harbors section in the wiki for more, but nothing there will contradict what cchrissyy wrote.

- Married couple Ages 38 and 35 / 1 Child (2.5 years old) - Combined salary of $217,816 (Wife Salary 54,576 / My Salary 163,240 - 2022 AGI $170,045 - Live in NYC - Current Pre-tax retirement savings balances $394,725 The thought process behind it is I am likely to have the same if not greater income when retired. ... We are both federal employees who also receive a fixed pension based on percentage of salary.... ....I am likely to move to a more cost friendly location outside of NYC that will allow me to yield a significant profit in my home all points to having more in retirement then I do now. The traditional vs. Roth (including convert now or later) question comes down to the marginal tax rate it costs to do Roth contributions/conversio...

It’s the tax treatment of the scholarship stipend that I’m unsure about. DD will get the answer, but I suspect it’ll be reported via the 1098-T, and Box 5 will be >Box 1. The Instructions for Form 8615 say "These rules [for whether Form 8615 must be filed] apply whether or not the child is a dependent." In your/your daughter's case, it seems to come down to Form 8615 must be filed if she "...didn’t have earned income that was more than half of [her] support." Further, "a scholarship received by your child isn’t considered support if your child is a full-time student." Ignoring the scholarship money, it comes down to how much of the $12K she earns this summer she will spend on herself, vs. how much you will spe...

...unearned income over $2,300 is the first question in screening for whether or not Form 8615 must be completed by the child. ... There are other screening questions other than the amount of unearned income to determine if filing an 8615 is required. Including "2. The child is required to file a tax return." Publication 501 includes Page 4: "You must file a return if...Your earned income was more than $12,950" Page 3: "Earned income...for purposes of filing requirements...also includes any part of a taxable scholarship." In other words, if the child's only income is a taxable scholarship of $12,950 or less, there is no filing requirement and thus no need to file Form 8615. Not the OP's situation, but may appl...

There is the Using a spreadsheet to maintain a portfolio wiki article.

We're at the 22% rate now and will be there even after RMDs start next year, as best I can figure it, so going with the traditional IRA investment now probably makes sense. From a strict dollar perspective, even if the marginal tax rates now and later are equal, "tie goes to the Roth" due to the way the “Traditional plus taxable” vs. Roth math works. But there are some things to consider before making that choice: Are the marginal tax rates now and later really 22%, or something other than 22% despite that being the nominal bracket rate? Are you more concerned (vs. #3) about incurring large deductible medical expenses in the future? That could decrease your future marginal rate and make traditional now more attractive. Are you mo...

There's nothing on Form 8606 or the instructions that says to zero out the basis if it's more than the year end balance. Correct. The instructions for line 2 specifically refer to carrying forward the basis calculated on "the last Form 8606 you filed" without any mention of the year-end balance on line 6 of that form. One possible "gotcha" is if you take a Roth IRA distribution in some year, requiring use of Form 8606 Part III, but not Part I. In that case, starting the year afterward, "the last Form 8606 you filed" would not have anything on the basis carry-forward line (currently line 14). This would happen regardless of whether there is a zero or non-zero balance in the traditional IRA. Is form 8606 TIRA ba...

jm1495 wrote: ↑Tue Mar 21, 2023 11:13 am How would you approach this ESPP?

Contribute the maximum allowed, then sell ASAP after the shares are available to you and invest the proceeds according to your desired asset allocation.

See also Your 1099-B form for an ESPP sale will probably be wrong, although because you already understand that there are non-qualified vs. qualified ESPPs you may know about the 1099-B issue already.

daacrusher2001 wrote: ↑Mon Mar 20, 2023 7:54 pm Hi - hoping for some ideas on this topic. Or maybe even some software tools that can help me decide.
...
I have a very detailed income/expense roadmap that I built in excel. It includes taxes, RMDs, and goes out to age 92 (I’m optimistic).
...
Is there anything I should be sure to model when analyzing this? Any tools I can use other than my own excel sheet ?

With that expertise, comparing your spreadsheet with either or both of those described in the Using a spreadsheet section of the Roth IRA conversion wiki could be worthwhile.

Any all-in-one resource you might recommend for retirement finance planning? There are so many moving parts and unknowns that "a reasonable guess" is usually the best one can do. Using Open Social Security: Free, Open-Source Social Security Calculator as a starting point for answering the "when to begin taking SS benefits?" question is one good resource. Even with that, one might want to adjust the defaults for life expectancy if one has good reason to do so, significant planned Roth conversions can make delaying SS benefits (but never beyond age 70) correct, etc. See this well-annotated chart as an example of something you might do for your own situation. That could help with the reasonable guessing - good luck!

Maybe.

Your 1099-B form for an ESPP sale will probably be wrong has some good content.

Aguilar wrote: ↑Mon Mar 20, 2023 8:38 am I'm not sure. I'm still hunting for confirmation but I think you're supposed to assess tax liability for Q1 and if you expect to owe, you pay estimated taxes for that amount (if you have reason to be concerned about an underpayment penalty).

Not necessary if you can meet your tax liability via withholding, regardless of when during the year the withholding occurs. See the safe harbors section linked earlier.

Any Social Security income?

See the charts in the Taxation of Social Security benefits wiki. Could be that you are in one of those high marginal rate zones, although 39.56% isn't one of the "usual" SS-influenced marginal rates so it could be something else.

neurosphere wrote: ↑Sun Mar 19, 2023 5:51 pm The wiki for "example 1b" points to a thread to which I just posted. The summary is that I'm of the opinion one can retain a basis in an IRA even if the IRA balance is zero.

FWIW, I agree that there should be no difference in basis retention among accounts having $1, $0.01, or $0 balances.

Aguilar wrote: ↑Sun Mar 19, 2023 6:04 pm

peteyboy wrote: ↑Sun Mar 19, 2023 5:48 pm

Aguilar wrote: ↑Sun Mar 19, 2023 3:59 pm I assume my $7k in capital losses would offset all these cap gains, up to $7k? Correct.

Previous poster said my carryover losses don’t offset capital gains taxes, just capital gains. So the info I stated above is all incorrect. You wrote Correct which has me second guessing here.

Probably the "correct" was meant for the "I assume..." sentence quoted above.

What do you mean by ‘not basis’? If my gross proceeds from the land sale are $75k and the cost basis is $40k, do I include $35k in my AGI calc?

Yes. Full tax returns include both the proceeds and the basis (e.g., see Form 8949), but only the difference goes into AGI. Most (all?) tax estimation tools simply ask for the difference.

Aguilar wrote: ↑Sun Mar 19, 2023 6:01 pm Thanks, that makes sense about the carryover reducing cap gains, not cap gains taxes owed. Temporary lapse on my part.

I contacted FreeTaxUsa to ask if they provide a 2023 view for tax planning purposes. Otherwise, I could use their 2022 edition, knowing it’s a bit off from 2023 rates. I checked out a couple of the free estimation tools in that link but couldn’t find one where I could enter SSDI and my land sale.

SSDI is treated exactly the same as SS. E.g., for the personal finance toolbox spreadsheet it would go in cell Calculations!B38; for capital gains/losses and capital loss carryovers, cells Calculations!D26, D27, M55, and M57.

kerplunk wrote: ↑Sun Mar 19, 2023 4:22 pm Thanks so much for the quick response. I never filed a 2021 IRS Form 8606. You are saying I can, today, file a 2021 IRS Form 8606? How do I do that?

See [Recommendation to file 1040x with prior year Form 8606] IRS thank-you note - Bogleheads.org

And that would be completely separate from my 2022 tax return that I am working on in TurboTax now?

Yes. Your 2022 Form 8606 would be filed with your 2022 return.

I have about $7k in capital losses to carryover to 2023. I expect $5k in capital gains taxes owed for this land sale. I will also have about $2k in dividend cap gains taxes. I assume my $7k in capital losses would offset all these cap gains, up to $7k? Capital loss carryovers reduce current year capital gains, not current year capital gain taxes. E.g., if one has $5K in capital gain tax, assuming the 15% capital gain tax bracket, that implies a capital gain of $5K/15% = $33,333. The $7K capital loss carryover would be subtracted from the $33,333, not the $5K. Does that make sense? I'm also trying to figure out if I'll owe the net investment income tax. Am I supposed to include my gross proceeds of this land sale in my AGI calculation, even...

Aguilar wrote: ↑Sun Mar 19, 2023 2:51 pm I'm in NYC. I've never paid state estimated payments before and always got a state refund. If after I estimate 2023 I calculate I owe to state, I'll pay estimated tax. I think when calculating my NY State tax liability, I'm supposed to aggregate both my NYS and NYC taxes withheld from my paychecks. Do you know if that's correct?

Don't know, but https://www.tax.ny.gov/pdf/current_form ... 105_9i.pdf might be helpful to you.

Yes, at the very least if you can use a non-zero value based on the letter of the Form 8606 Line 2 instructions.

See Example 1b in the backdoor Roth wiki for more.

Charles Joseph wrote: ↑Sun Mar 19, 2023 12:40 pm...wait until I'm retired in 2-3 years and do it when I'm in the 12% tax bracket

That is probably the best strategy. See the Roth IRA conversion wiki article for more. That might make it clear enough, or just raise more questions....

Aguilar wrote: ↑Sun Mar 19, 2023 8:30 am I was going to do it manually so I could apply 2023 tax rates and the 2023 standard deduction. Not worth it? I use freetaxusa software and can try that as well.

Most of the "Tax estimation tools" covered in that wiki have a 2023 option.

Well... Hold on... You have to attest that what you put on your W4 is true... so I doubt you can "stop".... See the flowchart at the top of Form 2210 : Complete lines 8 and 9 below. Is line 6 equal to or more than line 9? Yes ▶ You don’t owe a penalty. Don’t file Form 2210 unless box E in Part II applies, then file page 1 of Form 2210. See this quote on the W4 where you have to fill out something untrue to get to zero withholding.... "Under penalties of perjury, I declare that this certificate, to the best of my knowledge and belief, is true, correct, and complete." Assuming "using the entries on this W-4 will not, to the best of my knowledge and belief, subject me to any underpayment penalty when filing" as t...

dmwones85 wrote: ↑Sat Mar 18, 2023 4:07 pm Any advice based on the above information would greatly appreciated. Thank you in advance.

You could start with the
Getting started,
Prioritizing investments, and
Three-fund portfolio
wiki articles.

If that is sufficient, great!

If you think more personalized advice is needed, see the link retired@50 provided, and indicate (to the extent you are comfortable sharing) what might make the standard advice not applicable to your situation. Good luck!

rob wrote: ↑Sat Mar 18, 2023 3:03 pm Well... Hold on... You have to attest that what you put on your W4 is true... so I doubt you can "stop"....

See the flowchart at the top of Form 2210:

Complete lines 8 and 9 below. Is line 6 equal to or more than
line 9?

Yes ▶

You don’t owe a penalty. Don’t file Form 2210 unless
box E in Part II applies, then file page 1 of Form 2210.

The Tax estimation tools wiki offers several alternatives, including Stinky's suggestion to use what you might have already.

If you don't have commercial software available, two of the estimation tools include state tax estimates. I prefer the spreadsheet one, but that's a matter of taste.

If you can make withholding work, then you don't need to worry about quarterly amounts. See the Safe harbors discussion regarding federal tax. NY probably has something similar.

Yes, if you already meet that particular Safe harbor then you don't need to withhold more.

"Better" is often in the eye of the beholder. Schwab is indeed often mentioned along with Fidelity and Vanguard. Other than Vanguard, Boglehead-style mentions others.

frugalor wrote: ↑Fri Mar 17, 2023 10:12 pm Oh. You guys might be right. I am over 250K filing married jointly. So it's whatever my marginal tax bracket + 3.8%?

If you want a picture of your marginal tax rates, and can use Excel, the personal finance toolbox spreadsheet can show that.

If you add, say, $100 of interest, by how much does your federal (and, if applicable, state) tax change? Is that the same rate if you add some larger amount, say $10,000?

frugalor wrote: ↑Fri Mar 17, 2023 9:47 pm

FiveK wrote: ↑Fri Mar 17, 2023 9:46 pm The 1099-INT box 1 amount is added to, not deducted from, federal and state income. Is there a typo in your question (or more details needed)?

I mean my tax refund decreases as I enter my interest income

OK, understood.

You may be in the not uncommon situation that your marginal tax rate is higher than your nominal bracket rate.

The 1099-INT box 1 amount is added to, not deducted from, federal and state income. Is there a typo in your question (or more details needed)?

rushrocker wrote: ↑Thu Mar 16, 2023 4:39 pm Thanks for the replies.

Ultimately I was hoping to find a quick way to calculate the true cost of dividends as measured by an "expense ratio" when you hold a fund in a taxable account.

What other math would I need to consider to make this calculation?

The "Growth in a taxable account" section (A129:C148) on the 'Misc. calcs' tab of the personal finance toolbox spreadsheet might be helpful. Don't know about an "expense ratio" per se, but you could compare how much growth occurs when dividends are taxed vs. when they are not.

If you have seen an article anywhere that contradicts the quoted statement, it would be interesting to know that. It would be an incorrect article, but perhaps interesting nonetheless. Here is a quote from one of those incorrect articles. Yup, its a bank web page that provides investing advice. The 5-year rule on Roth conversions requires you to wait five years before withdrawing any converted balances — contributions or earnings — regardless of your age. If you take money out before the five years is up, you'll have to pay a 10% penalty when you file your tax return. https://www.unionbank.com/personal/financial-insights/investing/retirement/what-is-the-roth-ira-5-year-rule-important-guidelines-for-withdrawals Going to an IRS publication a...