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Old 02-16-2019, 09:11 AM
 
11,929 posts, read 21,513,618 times
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Quote:
Originally Posted by CaptainNJ View Post
more like lowest common denominator.
Unfortunately you just described the bottom 80% of the population...
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Old 02-16-2019, 02:03 PM
 
4,824 posts, read 1,213,947 times
Reputation: 3722
Quote:
Originally Posted by Lowexpectations View Post
If my standard deduction doubled because of tax law changes my taxable income went down, that would not be captured by your calculations
Um, yes it would. It would be captured in your taxable income. (which would be lower now).
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Old 02-16-2019, 02:04 PM
 
4,824 posts, read 1,213,947 times
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Quote:
Originally Posted by oneasterisk View Post
Huh? Wouldn't it be captured because the taxable income includes the standard deduction being taken from your total income? Total income is before any deductions right? Maybe I'm misunderstanding as I'm no tax expert.
I am an expert and you are correct.
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Old 02-16-2019, 02:05 PM
 
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Quote:
Originally Posted by SuiteLiving View Post
I would go with AGI. There can be unique situations that aren't addressed using gross income. For example, my company eliminated its 401(k) plan in 2017 so in 2018 I was able to make deductible IRA contributions. So AGI year to year is more comparable than gross income would be.
Nope. When you are calculating your EFFECTIVE rax rate, you use gross income.
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Old 02-16-2019, 02:09 PM
 
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Quote:
Originally Posted by oneasterisk View Post
Another site that uses Taxable income and NOT Gross Income in calculating the effective tax rate:

https://www.fool.com/investing/gener...t-whats-t.aspx

I'll defer to their methods
You need to reread this. They use gross income to calculate effective rate.


A simple example of how you determine your effective tax rate
Let's use the median U.S. household income, which is around $54,000, as an example. If you're a married joint filer earning that amount, that's your gross income, not your taxable income. So you'll need to figure out your deductions to get to your taxable income. Using the example above, the standard deduction in 2016 will be $12,600. If we subtract that standard deduction from $54,000, we get $41,400.

A married joint filer earning $41,400 in taxable income would fall in the 15% marginal tax bracket but would only pay 15% on income over $18,550 while paying 10% on the first $18,550 in taxable income. So here's how you would calculate your effective tax rate:

$18,550 x 10% tax rate = $1,855 in tax
$41,400 - $18,550 = $22,850 taxed at 15%
$22,850 x 15% tax rate = $3,427.50 in tax
$1,855 + $3,427.50 = $5,282.50 in total income tax
$5,282.50 / $54,000 = 9.8% effective tax rate
So the effective tax rate would be 9.8% for our theoretical median American taxpayer. If they had more tax deducti
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Old 02-16-2019, 02:10 PM
 
4,824 posts, read 1,213,947 times
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Quote:
Originally Posted by oneasterisk View Post
I can admit when I'm wrong so thank you for clearing that up.

I'm happy to pay the least amount of taxes I can.
Sorry, didn't see that it had already been pointed out.
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Old 02-16-2019, 02:12 PM
 
1,149 posts, read 524,593 times
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Quote:
Originally Posted by Grlzrl View Post
Nope. When you are calculating your EFFECTIVE rax rate, you use gross income.
No need to capitalize, I know fully well what is being discussed.

So a person with a 401k plan should have a higher effective tax rate than a person who contributed the same amount to an IRA? Where’s the logic in that?
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Old 02-16-2019, 02:12 PM
 
4,824 posts, read 1,213,947 times
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Quote:
Originally Posted by ChessieMom View Post
I always use my AGI to calculate the rate that is meaningful for me - the marginal rate. The effective tax rate can change drastically based on my retirement contribution. And truthfully either one is worth knowing...you just should understand which is which if you are doing comparisons.
The marginal rate is not the most meaningful rate. To compare apples to apples, you need to look at the effective rate. You only use the marginal rates to calculate your actual tax liability. When you want to compare your taxes to a prior year to see if you got a tax cut, you use effective rates. When you want to be pi$$ed off because you pay so much more in taxes than Warren Buffett, you need to look at the effective rate.
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Old 02-16-2019, 02:21 PM
 
4,824 posts, read 1,213,947 times
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Quote:
Originally Posted by oneasterisk View Post
https://apnews.com/cc177f202ea84c138151f6a3fc0fbfd3



I paid $1305 LESS taxes in 2018 than I did in 2017. My effective tax rate dropped a few percentage points even though my income went up about $5k in 2018.

My expected tax return amount did go down from 2017, but that's what I wanted when I changed my exemptions from 2 to 5 on 2/2018 resulting in an increase of $135 a month in my paycheck. I much preferred getting that larger paycheck and now expecting a few hundred dollars in this years tax return. A smaller tax return does not mean the tax law failed me...
Ahhh....someone who gets it.

Quote:
Originally Posted by wheelsup View Post
This is seriously infuriating and borderline negligent of the news to only report on tax refunds. What was the total tax paid? Compared to using last year's tax code? Insane.

#fakenews
Just spin to make Trump look bad. Nothing more. Nothing less.

Quote:
Originally Posted by TaxPhd View Post
I think it automatically means that the person doesn't really understand how our tax system works.
Yep.

Quote:
Originally Posted by CaptainNJ View Post
when people are saying that their refund was less; is that automatically supposed to mean that their tax rate was greater?
That's what they want you to believe because they know the average person won't dig any deeper.

Quote:
Originally Posted by bUU View Post
Nonsense. Refunds have a significant impact on the economy, beyond just the impact of lower taxes.

Without reporting the increase in the deficit, you're spewing fake news.
I can agree that big refunds probably give a temporary jolt to the economy. Sad that some people don't realized they are a bad financial decision.



Quote:
Originally Posted by SuiteLiving View Post
No need to capitalize, I know fully well what is being discussed.

So a person with a 401k plan should have a higher effective tax rate than a person who contributed the same amount to an IRA? Where’s the logic in that?
It depends. If you are talking about a Roth 401k, those would be after tax contributions but a regular 401k and a regular IRA should be the same in terms of tax benefits. Either way, the money would be deducted from your gross income to calculate your AGI on which your tax is calculated.
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Old 02-16-2019, 02:30 PM
 
Location: NJ
24,114 posts, read 30,231,951 times
Reputation: 16002
so are people calculating their effective tax rates for 2017 & 2018 and comparing them? ill do it when i have 2018 done.
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