Poll: Effective average Adjusted Livesoft tax rate?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

Effective average Adjusted Livesoft tax rate?

ALI > $240K, effective tax rate >25%
21
13%
ALI > $240K, tax rate >15%
23
14%
ALI > $240K, tax rate >10%
6
4%
ALI > $240K, tax rate >5%
4
2%
ALI > $240K, tax rate <=5%
0
No votes
ALI > $160K, effective tax rate >25%
2
1%
ALI > $160K, tax rate >15%
10
6%
ALI > $160K, tax rate >10%
14
9%
ALI > $160K, tax rate >5%
7
4%
ALI > $160K, tax rate <=5%
4
2%
ALI > $80K, effective tax rate >15%
3
2%
ALI > $80K, tax rate >10%
12
7%
ALI > $80K, tax rate >5%
15
9%
ALI > $80K, tax rate <=5%
10
6%
ALI <= $80K, effective tax rate >15%
3
2%
ALI <= $80K, tax rate >10%
4
2%
ALI <= $80K, tax rate >5%
2
1%
ALI <= $80K, tax rate <=5%
12
7%
I don't want to choose any of the above
10
6%
 
Total votes: 162

livesoft
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Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 7:09 pm

I want to have a poll about the average effective income tax rate that folks pay (income tax only, no FICA, no medicare) based on ALL their beneficial compensation that they end up eventually spending. In other words based on their Adjusted Livesoft Income.

I know for myself that between 30% and 50% of our income ends up being income-tax free, but is spent on things that benefit us.

____________. Find the Federal income tax you were liable for in 2014 (Form 1040, line 63 minus the sum of credits on Lines 66-69).
____________. Divide by your Adjusted Livesoft Income (see ALI worksheet in the next post).
____________. So you have tax expressed as a percent of ALI.

These numbers should come off your US Form 1040 (or equivalent I suppose) and perhaps your paycheck stubs which have the amounts you deducted for health insurance etc which will not be on your tax return. Please follow the ALI worksheet instructions and do not add in any other income even if you feel it is important (sorry!).

Then choose one of the poll options.

Besides the strictly entertainment purposes of the poll, one purpose of the poll would be to make people think about the non-taxed benefits they get. Another purpose would be to show folks that they do not pay as much in the way of taxes as they think they do. Or maybe I will be completely wrong about that.

Perhaps what might be actionable is that if someone finds they are paying lots more taxes for their ALI than others, then they can investigate how to try to save more on taxes.

Thanks.
Last edited by livesoft on Wed Apr 15, 2015 7:17 pm, edited 2 times in total.
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livesoft
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 7:10 pm

Adjusted Livesoft Income Worksheet

1. __________ Take the number of line 22 of Form 1040 (Total Income)
2. __________ If Line 13, Form 1040 is a loss, make it positive and put it here
3. __________ Tax-exempt interest, Line 8b, Form 1040
4. __________ Your (and spouse's) excluded retirement (401(k), 403(b), 457, etc.) contributions
5. __________ Your (and spouse's) excluded HSA, MSA contributions
6. __________ Your (and spouse's) excluded FSA, cafeteria plan contributions
7. __________ Your employer [matching or not] retirement plan contributions
8. __________ Your pre-tax health (dental, vision, medical) insurance payroll deductions
9. __________ Untaxed SS benefits (Form 1040 line 20a-20b)
10. _________ Your untaxed pension income (Form 1040 line 16a-16b)

T: __________ Add up lines 1-10, this is your Adjusted Livesoft Income

The original thread discussing the ALI is here.
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GoldenFinch
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by GoldenFinch » Wed Apr 15, 2015 7:16 pm

Is there a livesoft accounting agency that can crunch the numbers for those of us who are too tired from crunching our 2014 tax numbers. :D

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 7:21 pm

Sure, pm me your tax return and year-end pay stub and I will make the calculation for you. :)
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GoldenFinch
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by GoldenFinch » Wed Apr 15, 2015 7:23 pm

livesoft wrote:Sure, pm me your tax return and year-end pay stub and I will make the calculation for you. :)


Lol

The Wizard
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by The Wizard » Wed Apr 15, 2015 7:30 pm

Boy, this is the most complicated poll I've ever seen.
I'd have to put down my smartphone and go check my 1040 that I filed in February.
I'll get back to this eventually...
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555
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by 555 » Wed Apr 15, 2015 7:47 pm

Were you trying to set up a calculation that makes tax rates look lower?

All those things that you add back into income make my income look a lot higher, which makes my tax rate look higher! :wink:

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 7:49 pm

555 wrote:Were you trying to set up a calculation that makes tax rates look lower?

All those things that you add back into income make my income look a lot higher, which makes my tax rate look higher! :wink:

OK, but if the denominator is higher and the numerator stays the same ….

Although it is not part of the calculations in the poll, I found that our taxable income was less than 45% of our ALI. That is, more than 55% of our ALI is income-tax-free. We do not have any tax-exempt muni bond income either.
Last edited by livesoft on Wed Apr 15, 2015 7:52 pm, edited 1 time in total.
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The Wizard
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by The Wizard » Wed Apr 15, 2015 7:50 pm

555 wrote:Were you trying to set up a calculation that makes tax rates look lower?

All those things that you add back into income make my income look a lot higher, which makes my tax rate look higher! :wink:

I would think the opposite since the ALI results in a larger denominator...
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robert88
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by robert88 » Wed Apr 15, 2015 7:53 pm

I would need a live-soft cpa to answer this poll, but line 63/line 22 on the 1040 was about 15%.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 7:54 pm

robert88 wrote:I would need a live-soft cpa to answer this poll, but line 63/line 22 on the 1040 was about 15%.

That's exactly what I'm trying to avoid with this poll.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by mhc » Wed Apr 15, 2015 7:59 pm

I am the winner so far with the only poll selection of over 15%. I calculated 15.1%. My agi tax rate is about 17%. Of course this assumes I did my calculations correctly.

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dodecahedron
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by dodecahedron » Wed Apr 15, 2015 8:00 pm

I based my answer on the gold standard of true income, Haig Simons, the income definition that policy wonks like me use, consumption + change in net worth. Haig-Simons adds in pretty much everything livesoft adds in plus a few more things (most notably, unrealized capital gains, employer contributions to DB pensions and other untaxed fringe benefits, untaxed interest and dividend income inside tax advantaged accounts.) However, it would exclude a few things that livesoft's definition includes.

http://en.wikipedia.org/wiki/Haig%E2%80%93Simons_income

A broad measure like Haig-Simons is a good way for me to "count my blessings."

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by The Wizard » Wed Apr 15, 2015 8:00 pm

ALI does not include the value of employer subsidized parking or health insurance.
Those were decent numbers back when I was in the working class.
Is it too late to change it???
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 8:03 pm

The Wizard wrote:ALI does not include the value of employer subsidized parking or health insurance.
Those were decent numbers back when I was in the working class.
Is it too late to change it???

Yes, discussed in the previous thread and I decided not to include such a "hidden" compensation. I know that my health insurance was subsidized even though I paid premiums for part of the cost. ALI does have those premiums added back in though since they are not hidden.
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Rainier
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Rainier » Wed Apr 15, 2015 8:04 pm

I followed all the rules. $164k, 8%.
- Bill

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by peppers » Wed Apr 15, 2015 8:08 pm

I'll play.
If I did the math correctly, 8.25% on $139300 ALI
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mhc
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by mhc » Wed Apr 15, 2015 8:25 pm

livesoft wrote:
The Wizard wrote:ALI does not include the value of employer subsidized parking or health insurance.
Those were decent numbers back when I was in the working class.
Is it too late to change it???

Yes, discussed in the previous thread and I decided not to include such a "hidden" compensation. I know that my health insurance was subsidized even though I paid premiums for part of the cost. ALI does have those premiums added back in though since they are not hidden.


The employer part of the premiums showed up on my w-2. I think this is a change due to the ACA. The employer part could be added in.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 8:30 pm

mhc wrote:The employer part of the premiums showed up on my w-2. I think this is a change due to the ACA. The employer part could be added in.

Maybe for ALI 2.0 in 2016. I personally do not believe what shows up on the W-2 is a legitimate number. I think it is really a place for corporate accountants to do some creative accounting. One reason I say this is that I have priced plans on the open market without subsidies and the numbers on the W-2s that I have seen are quite a bit more than similar plans on the open market.

My spouse got a corrected W-2 where that number was changed, too.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Impromptu » Wed Apr 15, 2015 8:46 pm

ALI > 240K, 24.5% federal taxes.
I'll gladly pay you Tuesday for a hamburger today.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by The Wizard » Wed Apr 15, 2015 8:47 pm

If one changes the criteria for a poll after its start, there's a good chance Lady Geek will lock it.
You can ask Nisi about this...
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555
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by 555 » Wed Apr 15, 2015 9:00 pm

555 wrote:Were you trying to set up a calculation that makes tax rates look lower?

All those things that you add back into income make my income look a lot higher, which makes my tax rate look higher! :wink:
livesoft wrote:OK, but if the denominator is higher and the numerator stays the same ….
The Wizard wrote:I would think the opposite since the ALI results in a larger denominator...
Yes, but in my case, if you make the denominator higher, while the numerator stays the same, the ratio gets bigger! Think about it. :wink:

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Wed Apr 15, 2015 9:19 pm

555 wrote:Yes, but in my case, if you make the denominator higher, while the numerator stays the same, the ratio gets bigger! Think about it. :wink:

Nice, with numerator less than zero.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by baw703916 » Wed Apr 15, 2015 9:47 pm

If you have self-employment taxes, that is included on line 63. I assume that should be subtracted out?
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Dale_G » Wed Apr 15, 2015 9:49 pm

I don't agree that a tax loss deduction amounts to "income", but I none-the-less I followed the rules.

ALI >160k; taxes = 11.3%
But my "tax-free" income was only 6.3% of the total. I guess I have to adopt some children and put them in expensive daycare, or maybe have a tornado, or maybe need to get a brain transplant.

I don't mind paying taxes. I figure my contribution pays for 3 months of incarceration for Madoff - or about 1 week for someone detained at GITMO. Money well spent.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Bill M » Wed Apr 15, 2015 10:30 pm

I understand what you are trying to calculate with the ALI; my in-plan Roth conversion in my 401k distorts the values, since 16a and 16b report the gross and taxable amount of the conversion (neither was spendable income). So I adjusted the ALI before responding. It made the effective tax rate 26.7% instead of 15.8%.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by JLJL » Wed Apr 15, 2015 10:49 pm

livesoft wrote:Adjusted Livesoft Income Worksheet

...

10. _________ Your untaxed pension income (Form 1040 line 16a-16b)

...

The original thread discussing the ALI is here.


Leave this out if you are doing the "mega" right?

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Thu Apr 16, 2015 5:50 am

Dale_G wrote:I don't agree that a tax loss deduction amounts to "income", but I none-the-less I followed the rules.

The loss was included in Line 1 of the ALI worksheet, but it could be carried over from years ago. Line 2 of ALI worksheet just cancels it out.

As for 16a minus 16b (ALI ws line 10), I have to think about that. The idea is to not double-count income.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by nordlead » Thu Apr 16, 2015 6:46 am

>80k, -1.12% tax rate (if I followed the rules correctly). Child credits pushed line 63 down to 0, so, so the credits on line 66-69 push it negative.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by red5 » Thu Apr 16, 2015 6:59 am

<80k, -18% if I did everything correctly.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by The Wizard » Thu Apr 16, 2015 8:29 am

Being retired, this turned out to be simple for me. No benefits, so just taxable income in the denominator.
17.7% effective rate; >$80K income.

Another issue with this poll might be filing status, Single vs MFJ.
Tax rates and income levels vary significantly depending on that...
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by tj » Thu Apr 16, 2015 8:46 am

.....
Last edited by tj on Fri Apr 17, 2015 6:19 pm, edited 1 time in total.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Thu Apr 16, 2015 8:51 am

JLJL wrote:
livesoft wrote:Adjusted Livesoft Income Worksheet

...

10. _________ Your untaxed pension income (Form 1040 line 16a-16b)

...

The original thread discussing the ALI is here.


Leave this out if you are doing the "mega" right?


I suppose so, return of capital (especially previously taxed capital) should not appear in the ALI. And don't forget that capital is not earnings, so earnings that are tax-free because one used them for health insurance premiums or HSA or 401(k) contribution are included in ALI.

A small discussion backstage has pointed out that possibly return of capital gets included sometimes in the current ALI Worksheet. Certainly, return of capital is removed in Schedule D and I >think< that non-deductible tIRA contributions converted to a Roth IRA are also removed (but not previously deductible amounts that are conversions). In any event, one should remove previously-taxed return-of-capital that shows up and let me know about it. Thanks!
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by JLJL » Thu Apr 16, 2015 8:54 am

livesoft wrote:
JLJL wrote:
livesoft wrote:Adjusted Livesoft Income Worksheet

...

10. _________ Your untaxed pension income (Form 1040 line 16a-16b)

...

The original thread discussing the ALI is here.


Leave this out if you are doing the "mega" right?


I suppose so, return of capital (especially previously taxed capital) should not appear in the ALI. And don't forget that capital is not earnings, so earnings that are tax-free because one used them for health insurance premiums or HSA or 401(k) contribution are included in ALI.

A small discussion backstage has pointed out that possibly return of capital gets included sometimes in the current ALI Worksheet. Certainly, return of capital is removed in Schedule D and I >think< that non-deductible tIRA contributions converted to a Roth IRA are also removed (but not previously deductible amounts that are conversions). In any event, one should remove previously-taxed return-of-capital that shows up and let me know about it. Thanks!


Done and done (in the poll) and thanks.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by kenyan » Thu Apr 16, 2015 9:30 am

Doing pretty well at keeping federal income taxes down per this poll. Not doing so well if I add in payroll and state/local/property taxes.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Kosmo » Thu Apr 16, 2015 11:07 am

~$173k ALI, 8.99% taxes.

This actually shed a lot of light on the amount of non-(federally) taxable income I have. I never added it up this way before.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by texasdiver » Thu Apr 16, 2015 1:14 pm

196,000 ALI 11.7% Federal Tax

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Thu Apr 16, 2015 5:15 pm

I didn't expect to see folks publicly post their numbers. What's up with that?

I didn't expect to see anybody with ALI > $160K to have <=5% rate, and that is true so far.

I am glad to see some folks with ALI > $240K paying less than 10% in taxes. They are taking advantage of available tax breaks.

I will guess that the "ALI > $160K, effective tax rate >25%" vote is someone who is self-employed and pays the employer part of FICA/medicare and/or is single. Or maybe they did a Roth conversion. If they want to pm me any thoughts, I can relay them to this thread without their ID.

The "ALI <= $80K, effective tax rate >15%" vote is probably also a single person?
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by baw703916 » Thu Apr 16, 2015 5:23 pm

Livesoft,

Can you confirm that the line 63 (total tax) amount would need to be adjusted if one has self-employment tax? Since we are ignoring other payroll taxes...
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Thu Apr 16, 2015 5:33 pm

baw703916 wrote:Livesoft,

Can you confirm that the line 63 (total tax) amount would need to be adjusted if one has self-employment tax? Since we are ignoring other payroll taxes...

OK, subtract line 27 which is half of line 57 from total tax. OTOH, the non-self-employed get lower compensation generally since their employers pay this, so perhaps one should subtract line 27 from ALI, too?

Don't forget: This is for entertainment purposes only. One is not competing here. There are no winners and no losers.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by baw703916 » Thu Apr 16, 2015 5:42 pm

livesoft wrote:
baw703916 wrote:Livesoft,

Can you confirm that the line 63 (total tax) amount would need to be adjusted if one has self-employment tax? Since we are ignoring other payroll taxes...

OK, subtract line 27 which is half of line 57 from total tax. OTOH, the non-self-employed get lower compensation generally since their employers pay this, so perhaps one should subtract line 27 from ALI, too?

Don't forget: This is for entertainment purposes only. One is not competing here. There are no winners and no losers.


Half of self-employment tax does get deducted from self-employment income in calculating AGI (this corresponds to the employer's share of payroll tax if it were W2 income). So I agree with your last part. But why are we only subtracting half of self-employment tax? Non-self employed people do pay the other half out of their nominal salary, but as a payroll withholding, and it doesn't show up on their tax return.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Thu Apr 16, 2015 5:43 pm

OK subtract it.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by daave » Fri Apr 17, 2015 2:56 pm

ALI > $240K, ATR = 14.52% (so I answered > 10%).

On the verge of the >15% bracket, and would've been there had it not been for some one-off deductions.

While this exercise does make me think "Ok, so I'm really not paying all that much federal income tax", if the goal is to get a better sense of what my effective tax rate is, what portion of my income goes to the gov't, how about if I include all sources of taxation on income:

Taxes(SS + Medicare + Fed + NYS + NYC) / Income(W2_Box5 + Matching + Capital_Losses + Dividends_Distributions + Interest)
= 26.45%

Oh, and if I add an estimate of sales tax I paid, and property tax indirectly paid (via my landlord)
= 29.90%

Federal income taxes are, in this case, only half the story.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Fri Apr 17, 2015 5:51 pm

daave wrote:ALI > $240K, ATR = 14.52% (so I answered > 10%).
[…]
Federal income taxes are, in this case, only half the story.

OK, I no longer live NY, so I don't have to pay all those taxes. I was one of the "ALI > $240K, > 5%" votes. To give you something to compare to:
ALI > $240K
ATR = 6.4%
with FICA+Medicare+PropertyTax+NYStateIncomeTax+SalesTaxClaimedOnScheduleA, taxes are about 17.3% of ALI. And that's with a two-earner family with lots of SS taxes.

I think there might be "sweet spot" for tax rates. Folks who are in the sweet spot can have the highest fraction of sheltered income and still have enough to pay living expenses. People with less income cannot make use of all the tax breaks because they need to spend that money for living expenses. Folks with more income cannot shelter more of it away.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Fri Apr 17, 2015 5:59 pm

livesoft wrote:I will guess that the "ALI > $160K, effective tax rate >25%" vote is someone who is self-employed and pays the employer part of FICA/medicare and/or is single. Or maybe they did a Roth conversion. If they want to pm me any thoughts, I can relay them to this thread without their ID.

The "ALI <= $80K, effective tax rate >15%" vote is probably also a single person?


OK, I heard from both of these folks via PM.

The first one changed their vote, so their effective ALI tax rate is not >25%. Good for them!

The second one is single and cannot shelter any significant amounts of money away in a 401(k) because they are like an HCE and thus limited.
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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Carefreeap » Fri Apr 17, 2015 6:31 pm

I'm part of the 1%! LOL

Our ALI comes in at almost exactly $80k with 5.8 Fed Effective Rate.

But that doesn't really tell our story as our passive real estate losses are sheltering about $100k of passive income down to about $25k of income.

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by tj » Fri Apr 17, 2015 6:35 pm

Carefreeap wrote:I'm part of the 1%! LOL

Our ALI comes in at almost exactly $80k with 5.8 Fed Effective Rate.

But that doesn't really tell our story as our passive real estate losses are sheltering about $100k of passive income down to about $25k of income.



I hope this isn't what it sounds like - Losing $$ to save taxes ?

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Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by rkhusky » Sat Apr 18, 2015 12:54 pm

livesoft wrote:I didn't expect to see anybody with ALI > $160K to have <=5% rate, and that is true so far.


Looks like we exceeded your expectations at 4.2%. Adding in employer contributions to health insurance, drops us to 3.9%. Adding in employer contributions to SS+Medicare drops us to 3.8%. Having children helps with the percentages.

I estimate that without children, our percentage would rise to 8.2% (tax owed would nearly double).

livesoft
Posts: 57302
Joined: Thu Mar 01, 2007 8:00 pm

Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by livesoft » Sat Apr 18, 2015 1:55 pm

rkhusky wrote:
livesoft wrote:I didn't expect to see anybody with ALI > $160K to have <=5% rate, and that is true so far.


Looks like we exceeded your expectations at 4.2%.

Well played! Congratulations!
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Carefreeap
Posts: 2105
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Poll: Effective average Adjusted Livesoft tax rate?

Post by Carefreeap » Sat Apr 18, 2015 6:25 pm

tj wrote:
Carefreeap wrote:I'm part of the 1%! LOL

Our ALI comes in at almost exactly $80k with 5.8 Fed Effective Rate.

But that doesn't really tell our story as our passive real estate losses are sheltering about $100k of passive income down to about $25k of income.



I hope this isn't what it sounds like - Losing $$ to save taxes ?


LOL, depreciation and carry forwards from when we couldn't take depreciation.

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