Tax Question

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Bigfish
Posts: 98
Joined: Wed May 07, 2014 5:41 pm

Tax Question

Post by Bigfish » Fri Jul 14, 2017 5:30 am

DW and I will reach the RMD phase of our IRA's in three years. Although I have been transferring money from our IRA's into our roth's I am still concerned about going from the 15% to the 25% federal tax bracket when SS kicks in as well at about the same time, our state tax rate is high at approximately 7% for married couples filing jointly with income greater than 43,000. My questions are:
If I go into the 25% bracket will I pay taxes on all of our income of just the amount over the 15% amount?
How much money can we move annually from our IRA's into the roth's at our age (67) ?
BF

dbltrbl
Posts: 881
Joined: Thu Mar 01, 2007 11:52 am

Re: Tax Question

Post by dbltrbl » Fri Jul 14, 2017 6:33 am

Just the amount over 15% bracket. Relax, it is better to have this problem than no money. :sharebeer

Penguin
Posts: 548
Joined: Sat Mar 03, 2007 1:52 pm

Re: Tax Question

Post by Penguin » Fri Jul 14, 2017 6:36 am

I agree with dbltrble.
Bigfish wrote:DW and I will reach the RMD phase of our IRA's in three years. Although I have been transferring money from our IRA's into our roth's I am still concerned about going from the 15% to the 25% federal tax bracket when SS kicks in as well at about the same time, our state tax rate is high at approximately 7% for married couples filing jointly with income greater than 43,000. My questions are:
If I go into the 25% bracket will I pay taxes on all of our income of just the amount over the 15% amount?
That's easy. Only the amount above the 15% amount is taxed at 25%.
How much money can we move annually from our IRA's into the roth's at our age (67) ?
That's hard. Bogleheads suggests calculators to help you decide.
https://www.bogleheads.org/wiki/Tools_a ... alculators

BF
Jon

aristotelian
Posts: 4596
Joined: Wed Jan 11, 2017 8:05 pm

Re: Tax Question

Post by aristotelian » Fri Jul 14, 2017 6:37 am

Bigfish wrote:DW and I will reach the RMD phase of our IRA's in three years. Although I have been transferring money from our IRA's into our roth's I am still concerned about going from the 15% to the 25% federal tax bracket when SS kicks in as well at about the same time, our state tax rate is high at approximately 7% for married couples filing jointly with income greater than 43,000. My questions are:
If I go into the 25% bracket will I pay taxes on all of our income of just the amount over the 15% amount?
How much money can we move annually from our IRA's into the roth's at our age (67) ?
BF
What will be your income from other sources? The Roth conversion is typically done up to the limit of your current marginal tax rate without the conversion. If you are already in the 25% bracket, you might as well convert up to the limit of the 25% bracket.

retiredjg
Posts: 33554
Joined: Thu Jan 10, 2008 12:56 pm

Re: Tax Question

Post by retiredjg » Fri Jul 14, 2017 6:58 am

Bigfish wrote:If I go into the 25% bracket will I pay taxes on all of our income of just the amount over the 15% amount?
You will still pay tax on all of your taxable income, but you will only pay 25% on the portion that is over the line where the 25% bracket starts.

How much money can we move annually from our IRA's into the roth's at our age (67) ?BF
You can move it all if you want.

Are you trying to stay under some limit such as staying in the 15% bracket? If you have Medicare Part B (and maybe others) do you know there the next tier starts? You probably don't want to go over that number because your Medicare Premiums will go up.

Sidney
Posts: 6691
Joined: Thu Mar 08, 2007 6:06 pm

Re: Tax Question

Post by Sidney » Fri Jul 14, 2017 7:10 am

Depending on the composition of your income there is also a hidden 30% rate to watch for. It can kick in within the 25% bracket. Best way to find it is to prepare a dummy tax return.
I always wanted to be a procrastinator.

Bigfish
Posts: 98
Joined: Wed May 07, 2014 5:41 pm

Re: Tax Question

Post by Bigfish » Fri Jul 14, 2017 8:35 am

Ours sources of income for both of us are SS and IRA's, I also have a small pension. The goal is to keep us in the 15% tax bracket. Rough calculations put us at about $85,000 once SS and RMD\''s kick in, this includes calculation SS taxes at 85% This is with our current portfolio values and project RMD'. We should remain well below the next Medicare tier.
Thanks
BF

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