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The AMT provisions are a mess. They were never intended to impact people in your range (IMO). But rather for people with millions of dollars of income using big tax loopholes (legal deductions) to reduce their tax to a low level. This needs to be corrected, the tax regs simplified, flatten the rates, etc. It appears the net effect is to highly tax your small realestate business.
for sure it has to be redone . our earned income with both of us working part time is under 100k . this blast from the amt was based on a one time sale of some lease rights we held.
the amt was an extra 17,000 in tax over and above what the regular tax system already calculated which we already paid over 100k in estimated taxes on , you can call it a penalty more than a tax system..
that is what those who cry for higher taxes on the wealthy don't understand . they are already on another tax system. a 28% amt rate with phase outs met is a far cry from a 28% marginal rate.
Last edited by mathjak107; 03-21-2015 at 05:33 AM..
Fed Pension payroll withhold/tax $8,100 (CSRS don't get Social Security, but pay 7% payroll)
TOTAL $40,134this is killing me! I plan to move out of MD when I retire.
That is 45% of my Federal Taxable income.
Why would you include your CSRS deduction that goes into the CSRS Retirement Fund as a tax? It's not a tax in any sense of the word. It goes into your own specific retirement account and it's tracked throughout your federal employment. At retirement, when you begin to draw your annuity, OPM will tell you exactly how much you paid into the Fund over your career and will then pay it back to you over the course of your lifetime based on your life expectancy. And since it is a return of your own money for which you paid income tax on while working, it is not taxed in retirement. (I paid in just under $200k myself which I am now getting back at a rate of about $7k a year.)
One final point to show why it can't be considered a tax: were you to quit prior to retiring, you would be entitled to receive a refund of every penny you paid into the CSRS Retirement Fund. No one that pays into Social Security can say the same thing.
If you subtract out the (clearly) non-tax CSRS retirement deduction from your "tax" total above, your tax percentage will become much more reasonable.
You also pay indirect taxes...All the taxes on every corporation down to your local butcher are paid by you in the purchase price. Ultimately every tax dollar collected by federal,state and city is paid by the consumer....We should be allowed a tax deduction for every government employee as they are in reality our dependents..
Why would you include your CSRS deduction that goes into the CSRS Retirement Fund as a tax? It's not a tax in any sense of the word. It goes into your own specific retirement account and it's tracked throughout your federal employment. At retirement, when you begin to draw your annuity, OPM will tell you exactly how much you paid into the Fund over your career and will then pay it back to you over the course of your lifetime based on your life expectancy. And since it is a return of your own money for which you paid income tax on while working, it is not taxed in retirement. (I paid in just under $200k myself which I am now getting back at a rate of about $7k a year.)
One final point to show why it can't be considered a tax: were you to quit prior to retiring, you would be entitled to receive a refund of every penny you paid into the CSRS Retirement Fund. No one that pays into Social Security can say the same thing.
If you subtract out the (clearly) non-tax CSRS retirement deduction from your "tax" total above, your tax percentage will become much more reasonable.
I was thinking along similar lines but since I have never been a federal employee and was never married to one, I don't really understand that situation. Therefore I hesitated to post for fear of making a fool of myself. (Now there's a great straight line for one of my detractors. The response would be, "That's never stopped you in the past; why worry about it now?).
I hope CSRSJim will post to explain. It seems he made an error.
CSRSJim - I bring in about 80% of our combined income. Even though she recently got a new job at a higher pay rate my pension alone is still more than her income. Both my kids are grown and I can't claim the grandkids or the cats, so the only deductions I get are the property taxes and mortgage interest.
That was very informative - thanks. Now I note that in two different categories, California leads the nation in tax rate:
1. The gasoline tax
2. The top marginal rate of the state income tax (even though that rate applies only to people whose income exceeds one million dollars).
CSRSJim - I bring in about 80% of our combined income. Even though she recently got a new job at a higher pay rate my pension alone is still more than her income. Both my kids are grown and I can't claim the grandkids or the cats, so the only deductions I get are the property taxes and mortgage interest.
And not everybody who pays property taxes and mortgage interest even gets a tax deduction out of same because the total amount has to exceed the standard deduction before it is of any use tax-wise. One could posit a smallish house (equals a smallish loan) and/or a loan nearing the end of its term (equals a low percentage of the total payment going to interest) plus a locality with pretty reasonable property taxes and that may apply.
Although CSRS 7% payroll deduction and the Social Security 6.2% payroll deduction are not the exact same thing,
it is money that gets taken out of my pay just like SS is taken out of other's pay. I do agree the benefit (pension) of CSRS is better than SS, but the "tax" is about the same. And CSRS pension is taxed more than SS payments in retirement.
Many low income or long lived people draw a lot more SS benefit payments in retirement then they paid into the system. It is the higher income people paying into SS that get a worse percent benefit payments in retirement. But both systems are similar in that payroll deductions are used to pay benefits in retirement. It is not the same as a 401k, since those are voluntary and CSRS withholding and SS withholding are forced payments. They are either both "taxes" or they are both not. It is just the structure of the systems that is different, in fact SS is called insurance but the benefit is adjusted in a crazy way so it is better than normal insurance for low income and worse than insurance for high income.
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