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Old 12-19-2015, 01:05 PM
 
Location: SoCal
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Download a free version of Taxcaster for 2015. That's what I use to calculate how much I can withdraw and still within the tax rate.
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Old 12-19-2015, 01:37 PM
 
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Quote:
Originally Posted by BellaDL View Post
Blanco111,

IRA withdrawal is considered regular income subjecting to both Federal and NYS tax.

You have to add the expected IRA withdrawal amount to other taxable income to see what tax bracket that the total amount will bump you up to.

When you turns 70.5 years old, you will have to take RMD (required minimum distribution). You have to pay taxes on IRA withdrawal whether it is RMD or not. If you expect you rincome will be lower in the future then the tax on your IRA withdrawal will be lower simply because of lower total income.

Another thing to keep in mind is that withdrawing IRA thus adding to your income will reduce your SS benefit. Your IRA withdrawal is treated the same as 'earned' income because it is tax-deferred saving.

https://www.ssa.gov/planners/retire/whileworking2.html



My sister withdrew money from her 403b to buy a house when she was 66 years old and was surprised to see her SS payments got reduced.
IRA income may be considered earned income for federal tax purposes but as far as I know it does not count as income for purposes of reducing your SS by $1 for every $2 you make.
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Old 12-19-2015, 01:44 PM
 
Location: Idaho
1,458 posts, read 1,161,199 times
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Originally Posted by fumbling View Post
IRA income may be considered earned income for federal tax purposes but as far as I know it does not count as income for purposes of reducing your SS by $1 for every $2 you make.
fumbling,
You are right about IRA distribution not affect SS income.

http://wiki.fool.com/Does_IRA_Distri...al_Security%3F

Quote:
The Social Security Administration considers only earnings from employment or profits from self-employment in your total income when reducing your Social Security. It does not count any retirement or pension income in computing the allowable maximum. Thus withdrawals from IRAs or payments from pensions and annuities do not count against your Social Security benefits. Other types of unearned income not affecting your benefits include capital gains, interest or other government assistance.
However it does affect Medicare part B and D premiums

https://www.kitces.com/blog/income-t...-marginal-tax/
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Old 12-19-2015, 03:11 PM
 
113 posts, read 172,074 times
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Quote:
Originally Posted by LookingatFL View Post
Google Dinkytown 1040 and fill in the blanks at that site. It will give you a very good idea of your income tax liability and will tell you your marginal tax rate and your income tax bracket
I did use that site. And it told me I'm in the 25 percent tax bracket. Single and taxable income < $90,750. If my taxable income is $38,000, I subtract ($90,750 - $38,000) and get $52,750. I have to make sure I don't withdraw more than $52,750 from my IRA this year to avoid the 28 percent tax bracket rate for the amount over the $90,750. Is that correct?
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Old 12-19-2015, 03:28 PM
 
113 posts, read 172,074 times
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Quote:
Originally Posted by LookingatFL View Post
Google Dinkytown 1040 and fill in the blanks at that site. It will give you a very good idea of your income tax liability and will tell you your marginal tax rate and your income tax bracket
I did use that site. And it told me I'm in the 25 percent tax bracket. Single and taxable income < $90,750. If my taxable income is $38,000, I subtract ($90,750 - $38,000) and get $52,750. I have to make sure I don't withdraw more than $52,750 from my IRA this year to avoid the 28 percent tax bracket rate for the amount over the $90,750. Is that correct?
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Old 12-19-2015, 04:40 PM
 
6,562 posts, read 3,115,530 times
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Quote:
Originally Posted by Blanco111 View Post
I did use that site. And it told me I'm in the 25 percent tax bracket. Single and taxable income < $90,750. If my taxable income is $38,000, I subtract ($90,750 - $38,000) and get $52,750. I have to make sure I don't withdraw more than $52,750 from my IRA this year to avoid the 28 percent tax bracket rate for the amount over the $90,750. Is that correct?

I'm not familiar with the site you used, but assuming you have correctly computed your taxable income, yes that is correct.


In which case the smartest thing to do is what was suggested above..........withdraw the 52,750 before the end of 2015 and the rest of it in 2016. Don't forget that the amount you withdraw will be reduced by the amount of extra taxes. So, if you have to withdraw more to cover the taxes, you could still bump yourself into the higher tax bracket because you will also have to pay taxes on the amount you withdraw to cover taxes! Unless you have other money to cover the taxes, you may need to play around with the amount withdrawn each year to stay in the 25% bracket.
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Old 12-19-2015, 04:56 PM
 
Location: Florida
4,383 posts, read 3,724,411 times
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Quote:
Originally Posted by Blondy View Post
I'm not familiar with the site you used, but assuming you have correctly computed your taxable income, yes that is correct.


In which case the smartest thing to do is what was suggested above..........withdraw the 52,750 before the end of 2015 and the rest of it in 2016. Don't forget that the amount you withdraw will be reduced by the amount of extra taxes. So, if you have to withdraw more to cover the taxes, you could still bump yourself into the higher tax bracket because you will also have to pay taxes on the amount you withdraw to cover taxes! Unless you have other money to cover the taxes, you may need to play around with the amount withdrawn each year to stay in the 25% bracket.
In rough numbers you will pay about 13,000 in taxes on the 52,000. That leaves you 39,000 to put toward the house. If you got a 5% mortgage the 13,000 would pay about 7 years of your after tax interest payments. That assumes you earn nothing on the 52,000 if you left it in the IRA.

I dislike debt but I think I would take money out of the IRA each year to pay off the mortgage and not at the start of the mortgage. Remember you could lose the money if your investment goes South so you probably will not earn more than 5% on your funds that you would have withdrawn.

I think you can go either way, but do limit your with drawls so you stay in the 25% tax bracket so you probably have 3 years to with draw. 2015, 2016 and 2017.
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Old 12-19-2015, 05:48 PM
 
Location: Hiding from Antifa?
6,437 posts, read 4,197,361 times
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Quote:
Originally Posted by Blanco111 View Post
I did use that site. And it told me I'm in the 25 percent tax bracket. Single and taxable income < $90,750. If my taxable income is $38,000, I subtract ($90,750 - $38,000) and get $52,750. I have to make sure I don't withdraw more than $52,750 from my IRA this year to avoid the 28 percent tax bracket rate for the amount over the $90,750. Is that correct?
If your IRA will allow it, you could withdraw funds from your IRA without withholding taxes to the IRS this year and as soon as you get into January, withdraw the amount you will incur for extra taxes and pay estimated taxes as soon as you can. You may be able to get more out now without triggering the bracket jump, and it may even save you some money.

We just did that this fall to buy a house with a reverse mortgage. We took out about 155k without withholding. I just sent my tax guy my last paystub and more. He will tell us next week how much more we need to take out for the estimated payment. Before we started this he said it could save us around $3800 this way.
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Old 12-19-2015, 08:39 PM
 
113 posts, read 172,074 times
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Quote:
Originally Posted by rjm1cc View Post
In rough numbers you will pay about 13,000 in taxes on the 52,000. That leaves you 39,000 to put toward the house. If you got a 5% mortgage the 13,000 would pay about 7 years of your after tax interest payments. That assumes you earn nothing on the 52,000 if you left it in the IRA.

I dislike debt but I think I would take money out of the IRA each year to pay off the mortgage and not at the start of the mortgage. Remember you could lose the money if your investment goes South so you probably will not earn more than 5% on your funds that you would have withdrawn.

I think you can go either way, but do limit your with drawls so you stay in the 25% tax bracket so you probably have 3 years to with draw. 2015, 2016 and 2017.

I'm not going to apply for a mortgage. I plan to sell my current house and use other savings. It only occurred to me this year that I wanted to move. If I go into the 28 percent tax bracket, I pay 3 percent more in taxes for only the amount that goes over the $90,750. Is that right?
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Old 12-20-2015, 07:22 AM
 
2,045 posts, read 1,956,296 times
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Quote:
Originally Posted by Blanco111 View Post
I'm not going to apply for a mortgage. I plan to sell my current house and use other savings. It only occurred to me this year that I wanted to move. If I go into the 28 percent tax bracket, I pay 3 percent more in taxes for only the amount that goes over the $90,750. Is that right?
yes the 28% tax applies only to the amount over the amount that the 28% tax rate starts at.
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