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Back in 2014 we sold some appreciating assets and really ended up shooting ourselves in the foot .
We delayed selling and when we finally did they raised the capital gain ratess from 15 to 20% .added the obama medicare aca surcharge of 4% and instead of paying 15% we were now at 24%.
We also had a 17k amt penalty on our our total tax bill because of the gain. But that was not the end of it .
The following year we got hit with the amt again because of all the state and local taxes we paid when we filed . The huge deduction tripped the amt again.
But that aint all folks .
We were two years from medicare . Well medicare goes back 2 years to set premiums .
Our medicare premiums jumped by an additional 600 a month for 2 people . That is an additional 600 ,not the total premium.
So much for just a 15% capital gain rate . Geesh.
Thank you SO much! I had not considered the jump in our Medicare rates....that is a HUGE issue for us.
Thank you SO much! I had not considered the jump in our Medicare rates....that is a HUGE issue for us.
Can someone explain this a little more? I am 58 and newly forced into retirement so I am trying to learn about all of the issues as fast as I can.
I have some investments that may pay off big in the next few years and really help my retirement if I cash them in. Medicare is 7 years away for me, so if I understand this issue I should try to cash in before age 63? (assuming the rules don’t change by then)
Can someone explain this a little more? I am 58 and newly forced into retirement so I am trying to learn about all of the issues as fast as I can.
I have some investments that may pay off big in the next few years and really help my retirement if I cash them in. Medicare is 7 years away for me, so if I understand this issue I should try to cash in before age 63? (assuming the rules don’t change by then)
Here is an article that may help you understand how the IRMAA rules currently work re Medicare costs.
(Subject, of course, to change by Congress anytime now )
BTW, if you have a lot of money in traditional IRAs or 401k accounts, you want to pull as much out as you can afford between age 59.5 and whatever age you start SS benefits. This due to the taxability of SS benefits based on ordinary income above certain levels. Look at a 1040 instruction booklet for the SS benefits worksheet, and do some "what-if" calculations to see the effect. Or run some "what-if"'s here: How much of my social security benefit may be taxed? | Calculators by CalcXML
Keep learning, it only gets worse........
You might also want to lurk in the C-D Retirement and Health Insurance forums.
Can someone explain this a little more? I am 58 and newly forced into retirement so I am trying to learn about all of the issues as fast as I can.
I have some investments that may pay off big in the next few years and really help my retirement if I cash them in. Medicare is 7 years away for me, so if I understand this issue I should try to cash in before age 63? (assuming the rules don’t change by then)
medicare uses your taxable income 2 years prior to set your premiums . while most retirees do not draw high enough taxable incomes to get premium jumps the sale of assets with huge gains can make it a one year thing .
Be aware that the top rate of almost 24% on capital gains may not be the whole story . States do not recogmize special capital gain rates and a big capital gain can trigger the amt of it is still around .
If the gain is big enough the amt on all your other income can leave you worse off
you take your (TAXABLE) 60k +150k to come up with the income=$210k (you combine the income solely to see how much your LTCG will be taxed at. When it's time to tax your income, your ordinary income and your LTCG will have two different treatments)
im going to assume that you're MFJ
60k income is subject to the 15% tax on ordinary income
150k income is subject to a separate 15% on LTCG
For simplicity sake, your tax owed would be something in the 31.5k range. But it's better than to have 210k of ordinary income where you would have a tax bill of 58.8k. (again, there's a lot of variables to demostrate the two scenarios) But more importantly, don't forget about the state. If you live in a state that recognizes state income tax, you gotta pay those ****ers too. Not only you have to pay them but you'll get a nice little 1099-G from the state THE following year saying that you have to add back extra money to your federal taxes. (it gets confusing) And if you live in California, LMAO, good luck with that....
maybe you should talk with a cpa or tax planner to see which options are best for you.
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