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by FiveK
Wed Mar 27, 2024 8:33 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Preparation Fees
Replies: 12
Views: 855

Re: Tax Preparation Fees

If your niece's income is under the limit.... Technically there is no specific income limit for either VITA or Tax-Aide, nor is there any age limit. The Free tax return preparation for qualifying taxpayers page says "'generally' make $64,000 or less" as a suggestion for what "low to moderate" income means. Many VITA sites do use the $64K as a limit, and people generally accept it, but if someone wanted to make a stink about it the site wouldn't have a legal leg to stand on. One would hope, however, that people with six-figure incomes aren't using those sites to save what to them is a relatively small fee, thus displacing someone for whom the fee would be significant. But both of the OP's examples (unless the pension/W-2...
by FiveK
Wed Mar 27, 2024 7:20 pm
Forum: Personal Finance (Not Investing)
Topic: Filiing a 1099-int
Replies: 3
Views: 406

Re: Filiing a 1099-int

Does Income in Respect of a Decedent cover your situation?
by FiveK
Wed Mar 27, 2024 5:38 pm
Forum: Personal Investments
Topic: Have Trad IRA & plan to rollover gov't 457b into (separate) TIRA; any neg. consequences for Roth conversion of TIRA?
Replies: 1
Views: 163

Re: Have Trad IRA & plan to rollover gov't 457b into (separate) TIRA; any neg. consequences for Roth conversion of TIRA?

mariezzz wrote: Wed Mar 27, 2024 4:41 pm ...
Both the 457b and the TIRA only have pre-tax contributions.
...As far as I can tell, I won’t create disadvantage to me for doing the Roth conversion by rolling the 457b over to a TIRA now.
Correct
As I understand, Roth conversions have to be done by December 31 – you don’t have the option to stretch those until the tax deadline (April 15), correct?
Yes. The conversion counts for the same tax year as the calendar year in which you do it.
I'll probably have Vanguard initiate the direct transfer....
Yes, it is usually best to have the receiving company initiate.
by FiveK
Wed Mar 27, 2024 12:17 pm
Forum: Personal Finance (Not Investing)
Topic: 401k Roth vs. Pre-Tax...again
Replies: 6
Views: 385

Re: 401k Roth vs. Pre-Tax...again

bogwrangler7 wrote: Wed Mar 27, 2024 10:27 amAnd finally, and what I find a bit confusing is that usually discussions of roth/pre-tax never mention capital gains rates, but rather just compare across income tax brackets. In a roth scenario, aren't you paying income tax today, in lieu of paying capital gains taxes tomorrow?
This looks like a "Roth vs. taxable" question. For both, the contribution is made with after-tax dollars. Assuming qualified distributions from the Roth and investments increasing in value, taxable never wins that comparison.
by FiveK
Wed Mar 27, 2024 12:12 pm
Forum: Personal Investments
Topic: Retirement Calculators
Replies: 2
Views: 413

Re: Retirement Calculators

Listy, welcome to the forum.

1. Suggestions for the Wiki - Bogleheads.org

2. Depends what calculation is desired.

3. Open Social Security: Free, Open-Source Social Security Calculator will take a detailed look, but does not consider the impact on things like Roth conversions.

The general rule of thumb for income in retirement is that keeping a constant marginal tax rate (including forecasted SS, pension, RMD, Roth conversion, etc.) works well.
by FiveK
Wed Mar 27, 2024 12:01 pm
Forum: Personal Investments
Topic: Withdrawal Strategy Help Requested
Replies: 13
Views: 1258

Re: Withdrawal Strategy Help Requested

In a few years, check Open Social Security: Free, Open-Source Social Security Calculator to help with the "when to start taking SS?" question.

If you do move to the ACA for health insurance, see Roth Conversion and Capital Gains On ACA Health Insurance. Then when one or both of you hits age 63, see Roth Conversion with Social Security and Medicare IRMAA.

In general, consider the discussion (and linked articles) in Roth conversion - Bogleheads. Post back with questions prompted by any of the above, and good luck!
by FiveK
Tue Mar 26, 2024 9:41 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security: On the Vagaries of Timing
Replies: 15
Views: 1769

Re: Social Security: On the Vagaries of Timing

Jbzeus wrote: Tue Mar 26, 2024 9:34 pm I've been reading this trying to get it through my thick head. My birthday is in July and My FRA is 66 6 months (hit last January).

So... if I'm reading this right...waiting until 70 I get screwed for the months of July-December until the credits start for waiting until 70. Yes?
No.

If you file to start at age 70, you get the full DRCs immediately.

If you file to start at any time between FRA and age 70, starting in January (first payment received in February) means you don't miss any DRCs.

See this post for more.
by FiveK
Tue Mar 26, 2024 9:23 pm
Forum: Personal Finance (Not Investing)
Topic: Which line number in 1040 Tax form refers to my Tax Bracket ?
Replies: 8
Views: 843

Re: Which line number in 1040 Tax form refers to my Tax Bracket ?

johnpau wrote: Tue Mar 26, 2024 6:17 pm I'm aware of the progressive tax system, marginal tax rate, effective tax rate that is not my question :)

All I wanted to know which line item number in form 1040 I need to be looking at, so I know which tax bracket I'm under.
If you have qualified dividends or long term capital gains, see the Qualified Dividends and Capital Gain Tax Worksheet (p. 37 in https://www.irs.gov/pub/irs-pdf/i1040gi.pdf). The ordinary income will be on line 5, and the QD+LTCG income on line 4.

There are exceptions to the above, but that will cover most situations. And of course the marginal tax rates for both types of income may differ from the nominal bracket percentages.
by FiveK
Tue Mar 26, 2024 9:07 pm
Forum: Personal Finance (Not Investing)
Topic: MAGI AGI IRMAA
Replies: 4
Views: 552

Re: MAGI AGI IRMAA

Dregob wrote: Tue Mar 26, 2024 8:41 pm Is the other 15% added to AGI to determine MAGI?
Not for this MAGI. See MAGI for Medicare premiums (IRMAA tiers)
by FiveK
Mon Mar 25, 2024 9:10 pm
Forum: Personal Finance (Not Investing)
Topic: Turbo Tax - Cant enter Form 8606 for Backdoor Roth IRA
Replies: 13
Views: 728

Re: Turbo Tax - Cant enter Form 8606 for Backdoor Roth IRA

grtwallchina75 wrote: Mon Mar 25, 2024 8:59 pm I cannot find out in Turbox Tax where exactly I need to report the 2023 contributions....
You may want to go back to the FinanceBuff tutorials, especially the multi-year backdoor Roth IRA in TurboTax, 1st Year one.
by FiveK
Mon Mar 25, 2024 8:21 pm
Forum: Personal Finance (Not Investing)
Topic: Turbo Tax - Cant enter Form 8606 for Backdoor Roth IRA
Replies: 13
Views: 728

Re: Turbo Tax - Cant enter Form 8606 for Backdoor Roth IRA

grtwallchina75 wrote: Mon Mar 25, 2024 8:18 pm Do I just need to come up with my "own" 1099-R and report it in the income section of TT for 2023 contributions/covertions ?
No.

The contribution is reported on your TY2023 return, but the conversion isn't reported until your TY2024 return. Form 8606 is used for both years, just with different entries.
by FiveK
Mon Mar 25, 2024 7:18 pm
Forum: Personal Finance (Not Investing)
Topic: Mega Back Door Roth 401K AND Back Door Roth IRA
Replies: 13
Views: 786

Re: Mega Back Door Roth 401K AND Back Door Roth IRA

AudrinaBurgess wrote: Mon Mar 25, 2024 6:50 pm ...they may not have the option to make a backdoor Roth IRA due to income restrictions.
There is no income restriction (in the sense of a prohibition) for using the backdoor Roth process.
A backdoor Roth IRA is a strategy that allows you to make contributions to a Roth IRA despite exceeding income limits by first making contributions to a traditional IRA and then converting them to a Roth IRA.
Yes.
by FiveK
Mon Mar 25, 2024 5:02 pm
Forum: Personal Finance (Not Investing)
Topic: Turbo Tax - Cant enter Form 8606 for Backdoor Roth IRA
Replies: 13
Views: 728

Re: Turbo Tax - Cant enter Form 8606 for Backdoor Roth IRA

grtwallchina75 wrote: Mon Mar 25, 2024 3:02 pm we are comparing the TT generated form with prior year CPA file 8606, we are nervous now and may have to go back to CPA paying $1000.
If you can tell us in words (e.g,. "contributed $X on 10-Jul-2022 and converted $Y on 12-Jul-2022", etc.) what she did and all the non-zero amounts on her TY2022 and TY2023 forms 8606, you should get very helpful responses.
by FiveK
Mon Mar 25, 2024 4:57 pm
Forum: Personal Finance (Not Investing)
Topic: Federal and Georgia estimated taxes
Replies: 4
Views: 368

Re: Federal and Georgia estimated taxes

Timmar wrote: Mon Mar 25, 2024 4:26 pm Does anyone know of a Georgia equivalent to IRS 2210?
https://dor.georgia.gov/500-uet-underpa ... lfiduciary
by FiveK
Mon Mar 25, 2024 3:08 pm
Forum: Personal Finance (Not Investing)
Topic: Mega Back Door Roth 401K AND Back Door Roth IRA
Replies: 13
Views: 786

Re: Mega Back Door Roth 401K AND Back Door Roth IRA

The tax return for 2023 needs to be amended (or can Form 8606 just be sent to the IRS by itself?) with Form 8606. Much heat but little light has been shed on this question. It's not wrong to send a 1040-X along with the 8606, with the explanation "adding Form 8606" as the reason for amending. It may also work to send the 8606 by itself. For that matter, not sending a TY2023 8606 at all might also work for this situation, as long as the TY2024 8606 that documents the conversion uses the correct carry-forward basis. Then, as early as the next day, $13,500 is converted to Roth. There is no other traditional IRA, so there's no pro-rata problem. Then next tax season this all reconciles on the 2024 tax return. There should be no tax (o...
by FiveK
Mon Mar 25, 2024 2:11 pm
Forum: Personal Finance (Not Investing)
Topic: What are your "hidden" tax tips?
Replies: 56
Views: 4790

Re: What are your "hidden" tax tips?

realclemsongrad wrote: Mon Mar 25, 2024 2:10 pm
jebmke wrote: Sun Mar 24, 2024 6:08 am The unpublished 27% marginal tax rate
Sorry I do not see this one. Per the TT I see 10/12/22/24/32/35/37. Sorry If i am missing something.
See Marginal tax rate.
by FiveK
Mon Mar 25, 2024 12:20 pm
Forum: Personal Finance (Not Investing)
Topic: Mega Back Door Roth 401K AND Back Door Roth IRA
Replies: 13
Views: 786

Re: Mega Back Door Roth 401K AND Back Door Roth IRA

As with most things, there are more ways to do the backdoor Roth process incorrectly (and many examples can be found in this forum) than to do it correctly, but doing it correctly isn't all that difficult.

See Multi-year backdoor Roth using TurboTax, 1st Year and links therein for one guide.

Filling draft versions of Form 8606 by hand has been a good way for many to learn.
by FiveK
Mon Mar 25, 2024 11:19 am
Forum: Personal Finance (Not Investing)
Topic: Mega Back Door Roth 401K AND Back Door Roth IRA
Replies: 13
Views: 786

Re: Mega Back Door Roth 401K AND Back Door Roth IRA

High income does not prevent using the backdoor Roth process. See that article for more.
by FiveK
Mon Mar 25, 2024 1:14 am
Forum: Personal Investments
Topic: HSA limit for partial year
Replies: 6
Views: 688

Re: HSA limit for partial year

AlaskaTeach wrote: Sun Mar 24, 2024 11:54 pm Good thing I have a good cushion in my checking account.
You have until April 15 of next year to make your HSA contribution for this year.
by FiveK
Sun Mar 24, 2024 9:53 pm
Forum: Personal Investments
Topic: HSA limit for partial year
Replies: 6
Views: 688

Re: HSA limit for partial year

If you expect to be on an HSA-compliant HDHP for all of 2025, then you may use the last-month rule to make a full contribution for 2024.
by FiveK
Sun Mar 24, 2024 8:33 pm
Forum: Personal Finance (Not Investing)
Topic: TaxSlayer backdoor Roth IRA help
Replies: 30
Views: 4900

Re: TaxSlayer backdoor Roth IRA help

stratagem wrote: Sun Mar 24, 2024 5:19 pm
  • It also says, “Taxable amounts from this form will NOT carry to the 1040. Any taxable amount should be entered or adjusted on your 1099-R in box 2a.”
...
Am I doing something wrong, or is TaxSlayer unable to do backdoor Roth reporting right?
That bullet point is the important one.
...the tax owed seems correct, but TaxSlayer gives me the warning...
TaxSlayer cries wolf on this every time the taxable amount is less than the gross amount, even in cases like this in which that's exactly how it should be.
by FiveK
Sun Mar 24, 2024 6:10 pm
Forum: Investing - Theory, News & General
Topic: Is there any difference between cashing out a Mutual fund in/out of an IRA - if you are retired already?
Replies: 13
Views: 1438

Re: Is there any difference between cashing out a Mutual fund in/out of an IRA - if you are retired already?

catnamedspot wrote: Sun Mar 24, 2024 5:13 pm I've always been told to keep your money in an IRA as long as possible....
RickyAZ has already covered the "this year" tax effect.

Depending on your overall situation, you might want to do some Roth conversions: pay now to avoid paying a higher rate later, if that is your case.
by FiveK
Sun Mar 24, 2024 4:55 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains loss carryover if you sell no stocks
Replies: 16
Views: 1258

Re: Capital gains loss carryover if you sell no stocks

salilsurendran wrote: Sun Mar 24, 2024 4:51 pm I don't have a schedule D at all because I didn't sell any stocks last year?
How about all years in the past decade in which you used TurboTax?
by FiveK
Sun Mar 24, 2024 4:38 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains loss carryover if you sell no stocks
Replies: 16
Views: 1258

Re: Capital gains loss carryover if you sell no stocks

salilsurendran wrote: Sun Mar 24, 2024 4:11 pm yes i find no section in tax form for 2023 where any kind of carryover is mentioned.
Assuming there is some left, it would be on line 6 or line 14 of https://www.irs.gov/pub/irs-pdf/f1040sd.pdf.

Are there any non-zero amounts on those lines for any previous years' returns?
by FiveK
Sun Mar 24, 2024 2:50 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains loss carryover if you sell no stocks
Replies: 16
Views: 1258

Re: Capital gains loss carryover if you sell no stocks

salilsurendran wrote: Sun Mar 24, 2024 2:43 pm I use turbotax in order to file my taxes for the past decade, so I assumed that it automatically had my history and took care of my capital loss carryover.
Is there now some reason to believe that hasn't happened?
by FiveK
Sun Mar 24, 2024 10:50 am
Forum: Personal Finance (Not Investing)
Topic: What are your "hidden" tax tips?
Replies: 56
Views: 4790

Re: What are your "hidden" tax tips?

See this post for a great example of the marginal rate analysis mentioned several times.
by FiveK
Sun Mar 24, 2024 2:08 am
Forum: Personal Investments
Topic: House 2027
Replies: 36
Views: 3215

Re: House 2027

Famdamily22, welcome to the forum.

You can have a guaranteed return, or you can attempt to get a maximum return that is not guaranteed.

A 3-year CD paying ~5% interest is one reasonable option.

Or you could invest in stocks and hope for a higher return, as long as you understand that you might have a loss instead of a gain 3 years from now.
by FiveK
Sat Mar 23, 2024 12:38 pm
Forum: Personal Finance (Not Investing)
Topic: March Bonus & Estimated Taxes - Just Pay for Q1?
Replies: 4
Views: 385

Re: March Bonus & Estimated Taxes - Just Pay for Q1?

TheMoneyRat wrote: Sat Mar 23, 2024 7:28 am I searched the site for bonuses and estimated taxes but could not find my current situation addressed.
The Safe harbors section of the Estimated Tax wiki article may be useful.
by FiveK
Fri Mar 22, 2024 7:19 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains loss carryover if you sell no stocks
Replies: 16
Views: 1258

Re: Capital gains loss carryover if you sell no stocks

Not only may you deduct $3K from ordinary income this year, you must.

See Schedule D.
by FiveK
Fri Mar 22, 2024 4:55 pm
Forum: Personal Finance (Not Investing)
Topic: Need help! do I owe this much in taxes?
Replies: 7
Views: 1342

Re: Need help! do I owe this much in taxes?

anthonypals wrote: Fri Mar 22, 2024 1:53 pm Below are the details from my tax documents....
Lest you get answers based on incomplete information, what non-blank entries are in all the numbered boxes on all forms 1099-R you received for TY2023?
by FiveK
Thu Mar 21, 2024 9:47 pm
Forum: Personal Finance (Not Investing)
Topic: Roth vs Traditional 401k - Tax Bracket + FICA taxes
Replies: 4
Views: 478

Re: Roth vs Traditional 401k - Tax Bracket + FICA taxes

You could see how your marginal tax rate changes for different amounts of traditional 401k contributions by using the personal finance toolbox if you can use Excel.

You can also do "hand calculations" by manually changing your income in another tax program and calculate (change in tax)/(change in income) over a range of incomes.

That will give you your marginal tax saving rate now. That's half the battle. The other half is Estimating your future marginal tax rate when you will withdraw from the traditional accounts. Good luck!
by FiveK
Thu Mar 21, 2024 9:35 pm
Forum: Personal Investments
Topic: 23 years old, question about investments in taxable acct
Replies: 25
Views: 1948

Re: 23 years old, question about investments in taxable acct

CombustiveCrab wrote: Thu Mar 21, 2024 1:55 pm Lost on where to go from here....
You are off to a good start - congratulations! To continue, see Getting started - Bogleheads and go through the various links there.

In particular, consider the suggestions in Prioritizing investments.

Don't worry about picking the absolute best investment. You'll know that only in hindsight.
by FiveK
Thu Mar 21, 2024 12:41 am
Forum: Personal Finance (Not Investing)
Topic: a question regarding deductions or credits
Replies: 8
Views: 669

Re: a question regarding deductions or credits

miket29 wrote: Wed Mar 20, 2024 10:41 pm According to the tables at https://www.irs.gov/credits-deductions/ ... itc-tables there is no direct W2 test, rather you must meet the AGI test and not have more than $11K in investment income in 2023. So anything that reduces AGI, provided you meet the investment income test, helps.
It would be nice if this were true, but it isn't.

See p. 44 in https://www.irs.gov/pub/irs-pdf/i1040gi.pdf. For the income range of interest to the OP, you have to calculate the EIC twice: once using only earned income (e.g., W-2 box 1) and once using AGI. Then you take the smaller credit result.
by FiveK
Wed Mar 20, 2024 10:40 pm
Forum: Personal Investments
Topic: Taking long term capital gain
Replies: 11
Views: 1136

Re: Taking long term capital gain

CLKGTR wrote: Wed Mar 20, 2024 8:40 pm Can I sell my stocks then re-purchase right after just for 40k profit every year?
Maybe. Depends on how much other income you have. The idea is called Tax gain harvesting.
by FiveK
Wed Mar 20, 2024 9:47 pm
Forum: Personal Finance (Not Investing)
Topic: Form 8606 and non-deductible Trad IRA contributions: how to amend the total basis?
Replies: 13
Views: 746

Re: Form 8606 and non-deductible Trad IRA contributions: how to amend the total basis?

Joli wrote: Wed Mar 20, 2024 9:17 pm
FiveK wrote: Wed Mar 20, 2024 4:08 pm One might question why you haven't done the second part of the backdoor Roth....
Thank you Fivek. I will go over the wiki page to understand and learn about the second part of the rollover Roth.
Perhaps just a typo ("rollover" instead of "backdoor") but there are several similar-sounding things with very different meanings. E.g.,
- Roth conversion
- Backdoor Roth
- Mega-backdoor Roth
- Roth rollover
are four different things, so one has to be careful about the topic at hand. Good luck, and keep reading/asking until it's all clear to you!
by FiveK
Wed Mar 20, 2024 8:32 pm
Forum: Personal Finance (Not Investing)
Topic: a question regarding deductions or credits
Replies: 8
Views: 669

Re: a question regarding deductions or credits

FiveK wrote: Wed Mar 20, 2024 7:52 pm echobird, welcome to the forum.

Traditional IRA and/or HSA contributions, if you are eligible, are two that come to mind.
Note that neither of those will work if your earned income alone has you over the limit. But if you have some unearned income (interest, etc.) that, together with earned income, has you over the limit, then the traditional IRA or HSA contributions can help.
by FiveK
Wed Mar 20, 2024 7:52 pm
Forum: Personal Finance (Not Investing)
Topic: a question regarding deductions or credits
Replies: 8
Views: 669

Re: a question regarding deductions or credits

echobird, welcome to the forum.

Traditional IRA and/or HSA contributions, if you are eligible, are two that come to mind.
by FiveK
Wed Mar 20, 2024 7:48 pm
Forum: Personal Finance (Not Investing)
Topic: Tax software suggestions?
Replies: 22
Views: 1226

Re: Tax software suggestions?

gunny2 wrote: Wed Mar 20, 2024 5:37 pm I don't get needing my DOB either...(HR Block is asking this).
The standard deduction and some credits are age-dependent.
by FiveK
Wed Mar 20, 2024 7:44 pm
Forum: Personal Finance (Not Investing)
Topic: Help! Problem with Turbo Tax 2023 Form 5329 Additional Taxes on Qualified Plans
Replies: 4
Views: 423

Re: Help! Problem with Turbo Tax 2023 Form 5329 Additional Taxes on Qualified Plans

Perhaps How do I contact TurboTax? will help.

You could try deleting that Form 5329, then running TT's error-checking program to see if it comes back.
by FiveK
Wed Mar 20, 2024 4:08 pm
Forum: Personal Finance (Not Investing)
Topic: Form 8606 and non-deductible Trad IRA contributions: how to amend the total basis?
Replies: 13
Views: 746

Re: Form 8606 and non-deductible Trad IRA contributions: how to amend the total basis?

Joli wrote: Wed Mar 20, 2024 2:13 pm I have no Roth contributions or distributions of the traditional IRA.
One might question why you haven't done the second part of the backdoor Roth process, but given that you haven't...
1- if my understanding is correct and that line 14 of the form should be the accumulated non deductible contributions, is updating line 14 (total basis) for this year's form 8606 be the correct way to amend the amount of non deductible contributions I have made over the years to a traditional IRA?
...that should work.

See the 'Form8606' tab in the personal finance toolbox spreadsheet for one way to take a quick look at how past years' forms 8606 should have looked, including the value of line 14 in those years.
by FiveK
Wed Mar 20, 2024 1:38 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security: On the Vagaries of Timing
Replies: 15
Views: 1769

Re: Social Security: On the Vagaries of Timing

EricGold wrote: Wed Mar 20, 2024 10:54 am I think I came to the same conclusion as you -- in the case of spousal benefits only for the spouse and unfavorable birth dates (just about everybody), the optimal strategy for SS alone is likely to be for both to start benefits in Jan of the spouse FRA year
You could also check Open Social Security: Free, Open-Source Social Security Calculator for its suggestions.
by FiveK
Wed Mar 20, 2024 1:32 pm
Forum: Personal Finance (Not Investing)
Topic: Backdoor Roth Educational Material
Replies: 6
Views: 301

Re: Backdoor Roth Educational Material

Some details of my situation. Not eligible for Roth IRA contributions at this time due to high income. Maxing out 401k to the level of employer matching. Going beyond the employer match maximum to the IRS contribution maximum, whether in traditional or Roth 401k, is worth considering. See Prioritizing investments - Bogleheads . We have about $250k sitting in a regular IRA that I'm wondering if it would be wise to convert to a Roth IRA if it is possible. Probably not, "due to high income" now. See the Roth conversion wiki WCI linked. I'm just getting around to even thinking about the backdoor Roth IRA since there seems to be so much talk about it. But to be honest with you I don't think it will matter too much as I really don't th...
by FiveK
Wed Mar 20, 2024 1:25 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Questions for 26 y/o
Replies: 6
Views: 674

Re: Tax Questions for 26 y/o

investor656 wrote: Wed Mar 20, 2024 12:56 pm Do I need to be keeping records of my own Roth IRA basis?
Yes, in case you ever decide to take a Roth distribution before you reach age 59.5 and want to know if the distribution amount is below your cumulative contribution amount.
by FiveK
Wed Mar 20, 2024 12:49 pm
Forum: Personal Investments
Topic: How Much to Convert to Roth?
Replies: 53
Views: 4432

Re: How Much to Convert to Roth?

With calculations, the barometer of success I use is what the total lifetime tax cost will be under different scenarios. Consider two scenarios. Common to each is the same set of investments that triple in the years between now and some future time. Spending occurs at that future time. Tax paid from the conversion amount. Scenario A: Convert $10K to Roth at a 22% tax rate now. Withdraw tax-free to spend at that future time. Scenario B: Don't convert now. Withdraw at a 12% tax rate to spend at that future time. Spendable amount in A: $10K * (1 - 22%) * 3 = $23,400. Spendable amount in B: $10K * 3 * (1 - 12%) = $26,400. Tax cost in A: $10K * 22% = $2200 Tax cost in B: $30K * 12% = $3600 It's not the tax cost that matters, it's the spendable ...
by FiveK
Tue Mar 19, 2024 2:32 pm
Forum: Personal Finance (Not Investing)
Topic: Help with form 8606
Replies: 11
Views: 985

Re: Help with form 8606

sanbha wrote: Tue Mar 19, 2024 1:09 pm For line 2 of 8606 should my basis be...?
See the Total Basis Chart for the IRS answer.
by FiveK
Tue Mar 19, 2024 2:29 pm
Forum: Personal Investments
Topic: How Much to Convert to Roth?
Replies: 53
Views: 4432

Re: How Much to Convert to Roth?

With calculations, the barometer of success I use is what the total lifetime tax cost will be under different scenarios. Consider two scenarios. Common to each is the same set of investments that triple in the years between now and some future time. Spending occurs at that future time. Tax paid from the conversion amount. Scenario A: Convert $10K to Roth at a 22% tax rate now. Withdraw tax-free to spend at that future time. Scenario B: Don't convert now. Withdraw at a 12% tax rate to spend at that future time. Spendable amount in A: $10K * (1 - 22%) * 3 = $23,400. Spendable amount in B: $10K * 3 * (1 - 12%) = $26,400. Tax cost in A: $10K * 22% = $2200 Tax cost in B: $30K * 12% = $3600 It's not the tax cost that matters, it's the spendable ...
by FiveK
Tue Mar 19, 2024 1:32 am
Forum: Personal Finance (Not Investing)
Topic: Question regarding taxes and foreign earned income exclusion
Replies: 6
Views: 611

Re: Question regarding taxes and foreign earned income exclusion

See p. 36 in https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.

You avoid tax on the first $82K of income, but you pay the tax on income from $82,001 through $368K.

Because the tax rates are higher on the higher income, your tax bill is higher.