.
Last year, we converted $400,000 from one of our 401k accounts to a Roth account.
If you'd like more background about our situation, you can review this post from last year.
viewtopic.php?t=397687
Here are the results of our 2023 tax filing.
Looking at Federal Income Taxes Only:
If we had not done the conversion, our 2023 tax rate paid would have been 12.17%.
With the inclusion of the $400k taxable conversion, the tax rate we are paying is 23.11%.
With the IRMAA surcharges added in (that we'll pay in 2025), the effective rate is 24.64%.
So for each dollar of the $400k conversion, we paid a 29.91% effective tax rate.
Looking at Federal and State Taxes Together:
If we had not done the conversion, our 2023 tax rate paid would have been 14.76%.
With the inclusion of the $400k taxable conversion, the tax rate we are paying is 28.33%.
With the IRMAA surcharges added in (that we'll pay in 2025), the effective rate is 29.86%.
So for each dollar of the $400k conversion, we paid a 36.22% effective tax rate.
To be honest, my analysis was a bit hyper focused on the Fed, so State was a little surprising.
And while the numbers look kind of ugly, we'd be paying them in the future once RMD's hit us.
Wife and I are both 66 and retired now, so should have more conversion space in coming years.
Needless to say, we are writing some very large tax checks to Uncle Sam...![:-(]( "Sad")
.
Last year, we converted $400,000 from one of our 401k accounts to a Roth account.
If you'd like more background about our situation, you can review this post from last year.
viewtopic.php?t=397687
Here are the results of our 2023 tax filing.
Looking at Federal Income Taxes Only:
If we had not done the conversion, our 2023 tax rate paid would have been 12.17%.
With the inclusion of the $400k taxable conversion, the tax rate we are paying is 23.11%.
With the IRMAA surcharges added in (that we'll pay in 2025), the effective rate is 24.64%.
So for each dollar of the $400k conversion, we paid a 29.91% effective tax rate.
Looking at Federal and State Taxes Together:
If we had not done the conversion, our 2023 tax rate paid would have been 14.76%.
With the inclusion of the $400k taxable conversion, the tax rate we are paying is 28.33%.
With the IRMAA surcharges added in (that we'll pay in 2025), the effective rate is 29.86%.
So for each dollar of the $400k conversion, we paid a 36.22% effective tax rate.
To be honest, my analysis was a bit hyper focused on the Fed, so State was a little surprising.
And while the numbers look kind of ugly, we'd be paying them in the future once RMD's hit us.
Wife and I are both 66 and retired now, so should have more conversion space in coming years.
Needless to say, we are writing some very large tax checks to Uncle Sam...
.
Statistics: Posted by micron — Sat Feb 03, 2024 10:25 pm — Replies 0 — Views 54