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his ssdi turned taxable when he went over the threshold to stay tax free. it is an excess income issue not really a dividend problem . the extra income can be from anything since he was right at the edge ..
his ssdi turned taxable when he went over the threshold to stay tax free. it is an excess income issue not really a dividend problem . the extra income can be from anything since he was right at the edge ..
Bingo! Thanks for the info as that seems to be the case!
you don't understand what has happened . it isn't a 900 dollar tax on the dividend . the dividend took his ssdi income over the non taxable limit and now his entire ssdi became taxable .
so now he has the small tax on the dividend and all the taxes on his ssdi due. it looks like the dividend is being taxed at 900 dollars but it isn't , it is the taxes due on ssdi and the dividend which are now two moving targets .
1k additional for a single creates the effect of a 46% marginal tax rate on the overage . it is about 27% for a couple .
the same thing happens when someone exceeds social security retirement benefits by a grand or two and they turn taxable
I guess it was all in the order I did it. I first did my wife's W2, then my SSDI, then my extra income and then my investments. Since my investments were the last I entered, they are what made me cross the threshold. And since the amount was pretty small, the increase in taxes looked huge! If I had of put my extra income in last, it would have been what crossed the threshold and I would not have been as upset because the larger amount of extra income would not have had that amount of taxes look redicules as my whole career I've been used to paying a bit more with "self employment tax". That is where I got confused as, like clearly stated by mathjak, my investments, though small, took my total income above the threshold. I really thought it was my Div's being taxed at such a high rate because as soon as I put in the info and hit "next", my taxes jumped a grand. As it was, my Div's weren't taxed any more then usual, I just had to pay taxes on other income as well. Oh well, live and learn. That's why I ask questions.
they tend to think because their incomes are not high they do not have to think about or learn about tax planning .
boy , do they find out the hard way how wrong they are . in fact it becomes more critical when every penny counts and suddenly taking an extra grand or two sees up to 1/2 of it evaporate because of the two moving targets involved with both ss and ssdi
I expect many of the people who are hitting these high effective rates have no idea it's even happening. They just plug the numbers into TurboTax and get their tax bill.
Many, many times I've seen people comment that they are "using up" their 15% bracket to do Roth conversions, thinking the tax rate is only 15%. It's a reasonable assumption, but possibly incorrect if they are taking SS benefits.
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