The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: infogoon on April 07, 2015, 08:32:42 AM

Title: Effective federal income tax rate?
Post by: infogoon on April 07, 2015, 08:32:42 AM
This being tax season, I always like to take a look at what my effective tax rate is, as measured by my total federal income tax paid vs. my gross income. This year? 1.4%.

How about you?
Title: Re: Effective federal income tax rate?
Post by: Gone Fishing on April 07, 2015, 08:56:02 AM
8.3%   
Title: Re: Effective federal income tax rate?
Post by: Melf on April 07, 2015, 09:02:53 AM
Apparently way too much at 16.3%
Title: Re: Effective federal income tax rate?
Post by: Runge on April 07, 2015, 09:54:12 AM
Mine was 12.5% for 2014, down from 15.6% for 2013. Both years I've been in the 25% tax bracket.
Title: Re: Effective federal income tax rate?
Post by: Middlesbrough on April 07, 2015, 10:05:30 AM
11.3% because I fudged up some deferrals.
Title: Re: Effective federal income tax rate?
Post by: NotJen on April 07, 2015, 10:07:25 AM
17% for 2014. (Fed income only, not including FICA and state tax, 28% with all that included ~ gosh, it's expensive to work!)

Single, no kids, standard deduction, solidly in 25% bracket. :( {Actually, I'm pretty happy about all of that.}
Title: Re: Effective federal income tax rate?
Post by: DoubleDown on April 07, 2015, 10:55:48 AM
Something like -2% on a combined income of around $90k! That's not a typo.

For the first time ever, I got back MORE from the government than I paid in (and the state paid us even more). So, federal tax rate was 0% but they gave us an additional $2000 in credits. Wife earned close to $60k, I earned $5k (and ER'ed), and I took about $25k in long term capital gains. With kids, 401k contributions, mortgage interest, etc., the federal government gave us back $2000 more than we paid in.

We have one f'ed up tax system when a family of 4 can earn $90k and be given $2000 by the government! I knew we'd pay close to zero in taxes once I ER'ed, but I never dreamed the government would be a source of additional income. Did I feel bad cashing the check? No. (Especially since I've easily paid in hundreds of thousands or even a million dollars in taxes over my lifetime).
Title: Re: Effective federal income tax rate?
Post by: zolotiyeruki on April 07, 2015, 11:23:39 AM
For federal, about -4.4%, if you only count income tax.

If you add back in FICA (plus employer's part) and Illinois state income tax, it's about 15%.
If you add in property taxes, it's about 27%.
Title: Re: Effective federal income tax rate?
Post by: RelaxedGal on April 07, 2015, 11:36:25 AM
19%.

Married, 2 incomes, 1 kid, Roth 401Ks, high income, lots of taxable investments, USA.
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 07, 2015, 01:19:15 PM
8.7%
Title: Re: Effective federal income tax rate?
Post by: teen persuasion on April 07, 2015, 01:37:40 PM
Federal only, -19.64%

Next year's refund will be smaller - another kid over 16, and likely won't claim college kid #3 any longer, so drop to lower category for EITC as well as losing college tax credits.
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 07, 2015, 01:44:33 PM
-2%.  We have a rental plus w-2 income.  Two low income wage earners with a kid in a LOCA so we were able to put enough in my husband's 401k to stay within the 10% bracket.
Title: Re: Effective federal income tax rate?
Post by: Apples on April 07, 2015, 01:47:14 PM
9.8% for MFJ, no kids, 15% tax bracket, Roth IRAs, some taxable investments, standard deduction, and student loan interest deduction.
Title: Re: Effective federal income tax rate?
Post by: Kriegsspiel on April 07, 2015, 01:48:34 PM
10.3%.
Title: Re: Effective federal income tax rate?
Post by: sol on April 07, 2015, 01:51:23 PM
3.9 percent if you just divide line 63 federal taxes paid by total W2 income.  And that's on an income well into the 28% tax bracket.

edit: would be 3.0 percent if I included all sources of income.  It's artificially low this year, though, due to solar panel rebate.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 07, 2015, 02:35:27 PM
22% effective federal rate (includes a tad of the 3.8% ACA tax but not SS or medicare)

Retired this year though.   Next year baby!  Effective federal rate is gonna be negative with ACA subsidy!
Title: Re: Effective federal income tax rate?
Post by: dividendman on April 07, 2015, 03:02:37 PM
TurboTax says mine is 24.29% :(
Title: Re: Effective federal income tax rate?
Post by: Hey It's Me on April 07, 2015, 05:10:18 PM
-11.9%

I made ~$23k last year, and paid for books/fees for college.
Title: Re: Effective federal income tax rate?
Post by: ColaMan on April 07, 2015, 05:49:03 PM
18.8%, MFJ, 33% bracket.
Title: Re: Effective federal income tax rate?
Post by: kpd905 on April 07, 2015, 05:59:08 PM
8.5% for my income.  This year we'll be married, and I think we might get down to around 7%.
Title: Re: Effective federal income tax rate?
Post by: RexualChocolate on April 07, 2015, 05:59:54 PM
I'm sure theres some noise with how everyone is calculating their numerator and denominator. The negative effective rates are typically massed depreciation and EITC.

For me, 21%, completely salaried employee without enough politically favored behaviors to warrant itemization. Did not include 401k match or pension in the numerator or denominator nor did I subtract out state tax.

Its expensive to be a single guy with no dependents and no house 8)
Title: Re: Effective federal income tax rate?
Post by: sol on April 07, 2015, 06:20:01 PM
Its expensive to be a single guy with no dependents and no house 8)

It's expensive to be a RICH single guy with no dependents and no house.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 07, 2015, 08:01:36 PM
Its expensive to be a single guy with no dependents and no house 8)

It's expensive to be a RICH single guy with no dependents and no house.

$120,000 or so is not rich.   It is not even known if he makes that consistently.

Compare this with a lower paid government worker who pays little federal tax yet can retire at age 50 something with a $50k+ pension.  Now that is rich.
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 07, 2015, 08:42:33 PM
Its expensive to be a single guy with no dependents and no house 8)

It's expensive to be a RICH single guy with no dependents and no house.

$120,000 or so is not rich.   It is not even known if he makes that consistently.

Compare this with a lower paid government worker who pays little federal tax yet can retire at age 50 something with a $50k+ pension.  Now that is rich.
Lol, or a non-governmental employee who makes $120,000 and retires with a $42,000 pension plus half a mill in a 401k, like my mom.  I think I'd rather have the high pay and the pension than be a governmental worker.
Title: Re: Effective federal income tax rate?
Post by: sol on April 07, 2015, 08:47:50 PM
Compare this with a lower paid government worker who pays little federal tax yet can retire at age 50 something with a $50k+ pension.  Now that is rich.

Why, exactly, do you think that government workers pay "little federal tax"?  Government workers pay the exact same tax rate as every other working stiff, and have since 1987.

And speaking as one of those lower paid government workers with a pension, I should point out that I can retire at age 57 and get $23,100 per year.  It's not chump change, but it's hardly a sweetheart deal either.
Title: Re: Effective federal income tax rate?
Post by: beltim on April 07, 2015, 09:10:05 PM
Its expensive to be a single guy with no dependents and no house 8)

It's expensive to be a RICH single guy with no dependents and no house.

$120,000 or so is not rich.   It is not even known if he makes that consistently.

Compare this with a lower paid government worker who pays little federal tax yet can retire at age 50 something with a $50k+ pension.  Now that is rich.

I'll give you one guess how many federal employees can retire at age 50 with a pension in excess of $50k.
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 08, 2015, 06:27:13 AM
Its expensive to be a single guy with no dependents and no house 8)

It's expensive to be a RICH single guy with no dependents and no house.

$120,000 or so is not rich.   It is not even known if he makes that consistently.

Compare this with a lower paid government worker who pays little federal tax yet can retire at age 50 something with a $50k+ pension.  Now that is rich.

I'm a higher paid government worker who can retire at 56.  I pay lots of federal taxes and I also pay into my retirement.  I'm still not rich.

BUT, I save a lot and spend much less.
Title: Re: Effective federal income tax rate?
Post by: thd7t on April 08, 2015, 07:19:43 AM
Its expensive to be a single guy with no dependents and no house 8)

It's expensive to be a RICH single guy with no dependents and no house.

$120,000 or so is not rich.   It is not even known if he makes that consistently.

Compare this with a lower paid government worker who pays little federal tax yet can retire at age 50 something with a $50k+ pension.  Now that is rich.
$120,000 is in the top quintile of households in the US.  We don't have a definition of Rich, but he is a high income earner, by US standards.  There are only five cities in the US where that doesn't get you into the top 25% of incomes.  For a single person, that's pretty great.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 07:33:21 AM
After this year I don't really care about the fairness of the tax code since we will be pulling up to the trough.

But anyway, here is a possible example:

State/Federal civil engineer, making $70,000 a year, pays 5% of their salary into a pension fund, employer pays 15% (the figures are all over the place, some pay only a couple percent).   After 30 years they are eligible for a COLA'd pension of $45,000 per year, which is worth near $1,000,000 if purchased as an annuity from a private insurance company.

Private sector engineer, makes $90,000 a year doing the same work, no pension.  Pays 40% tax (SS + federal + medicare + state) on that extra $20,000, taking home only $12,000 of it.

For 30 years he puts that $12,000 in a conservative investment so he can be guaranteed to be able to buy an annuity.   He will have nowhere near enough to buy a COLA'd $45,000 annuity.   Part of this is because he was heavily taxed and the other person was not, even though they essentially had the same spending money after setting aside retirement.

Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 07:54:06 AM
After this year I don't really care about the fairness of the tax code since we will be pulling up to the trough.

But anyway, here is a possible example:

State/Federal civil engineer, making $70,000 a year, pays 5% of their salary into a pension fund, employer pays 15% (the figures are all over the place, some pay only a couple percent).   After 30 years they are eligible for a COLA'd pension of $45,000 per year, which is worth near $1,000,000 if purchased as an annuity from a private insurance company.

Private sector engineer, makes $90,000 a year doing the same work, no pension.  Pays 40% tax (SS + federal + medicare + state) on that extra $20,000, taking home only $12,000 of it.

For 30 years he puts that $12,000 in a conservative investment so he can be guaranteed to be able to buy an annuity.   He will have nowhere near enough to buy a COLA'd $45,000 annuity.   Part of this is because he was heavily taxed and the other person was not, even though they essentially had the same spending money after setting aside retirement.

If the engineer worked for the Federal government the pension would be $21,000 a year.  So you're only off by 114%.

Stop making up numbers that have no basis in reality.
Title: Re: Effective federal income tax rate?
Post by: sol on April 08, 2015, 07:54:57 AM
I'll give you one guess how many federal employees can retire at age 50 with a pension in excess of $50k.

The GS pay scale currently maxes out at ~$150,000/year including locality-specific bonuses, and to get that high you basically need to run a federal facility of some sort, like a supermax prison or the regional office for a cabinet level agency.  50k divided by 150k is 33.3 and federal pensions pay 1% per year of service, so you'd only need to work 33.3 years to get a $50k pension at the highest possible GS pay grade and step.  I guess maybe you could start at age 16 and then work your 33.3 years, and then retire at age 50 with $50k in pension.  See?  Totally possible.  Sort of.

Also, former Presidents of the United States receive a lifetime pension greater than $50k/year, and they are technically federal employees too.  Of course, none of them has ever been retired at age 50.  Kennedy would have been the first, had he survived a single 4 year term and not been re-elected.

But anyway, here is a possible example:

State/Federal civil engineer, making $70,000 a year, pays 5% of their salary into a pension fund, employer pays 15% (the figures are all over the place, some pay only a couple percent).   After 30 years they are eligible for a COLA'd pension of $45,000 per year, which is worth near $1,000,000 if purchased as an annuity from a private insurance company.

What are you basing those numbers on?  Why do you think a government employee who makes $70k/year gets a $45k/year pension?  That would require 45/70 times 1% per year would mean that person had to work 64 years to get that pension.  Even if they started at 18, that person's life expectancy at age 64+18=82 is short enough that even a pension of $100k/year wouldn't get back out everything they had paid in.

I think you have some serious misconceptions about how the federal pension system works. 
Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 08:06:14 AM
I'll give you one guess how many federal employees can retire at age 50 with a pension in excess of $50k.

The GS pay scale currently maxes out at ~$150,000/year including locality-specific bonuses, and to get that high you basically need to run a federal facility of some sort, like a supermax prison or the regional office for a cabinet level agency.  50k divided by 150k is 33.3 and federal pensions pay 1% per year of service, so you'd only need to work 33.3 years to get a $50k pension at the highest possible GS pay grade and step.  I guess maybe you could start at age 16 and then work your 33.3 years, and then retire at age 50 with $50k in pension.  See?  Totally possible.  Sort of.

Also, former Presidents of the United States receive a lifetime pension greater than $50k/year, and they are technically federal employees too.  Of course, none of them has ever been retired at age 50.  Kennedy would have been the first, had he survived a single 4 year term and not been re-elected.

But anyway, here is a possible example:

State/Federal civil engineer, making $70,000 a year, pays 5% of their salary into a pension fund, employer pays 15% (the figures are all over the place, some pay only a couple percent).   After 30 years they are eligible for a COLA'd pension of $45,000 per year, which is worth near $1,000,000 if purchased as an annuity from a private insurance company.

What are you basing those numbers on?  Why do you think a government employee who makes $70k/year gets a $45k/year pension?  That would require 45/70 times 1% per year would mean that person had to work 64 years to get that pension.  Even if they started at 18, that person's life expectancy at age 64+18=82 is short enough that even a pension of $100k/year wouldn't get back out everything they had paid in.

I think you have some serious misconceptions about how the federal pension system works.

Interesting case study.  I wonder if anyone hit GS15-10 at age 50 with 33.3 years of service.  I'm thinking no, if only because I doubt anyone who reaches that level doesn't have a college education.

Actually, I was thinking along the same lines as your second paragraph - members of Congress who serve 20 years get a pension in excess of 50k too - because they get 1.7% per year for their first 20 years of service.  So a Representative has to be elected by age 30, and a senator would have to be elected exactly at age 30 I'm order to get 20 years of service before they turn 51.  Of course, there's only 1 Representative in Congress who was elected at age 30, and the youngest Senator was 36 when he was elected, so in practice this doesn't happen very often. But it's totally technically possible.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 08:20:24 AM
Perhaps I should have said state, not federal.  It seems federal pension benefits are some of the lower ones.

It is very hard to find exact sources online for various salaries and pensions.

I did read awhile back that the average state pension is $25,000, which seems higher than almost all federal pensions except the highest earners.

My point was that these pensions allow for tax avoidance, or at least tax deferral.   This masks the income of the pensioner making them look poor compared to the "rich" guy who must save for all of his retirement.
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 08, 2015, 08:23:29 AM
Perhaps I should have said state, not federal.  It seems federal pension benefits are some of the lower ones.

It is very hard to find exact sources online for various salaries and pensions.

I did read awhile back that the average state pension is $25,000, which seems higher than almost all federal pensions except the highest earners.

My point was that these pensions allow for tax avoidance, or at least tax deferral.   This masks the income of the pensioner making them look poor compared to the "rich" guy who must save for all of his retirement.
As a grad student I worked for the state of NY.  We had a pension system, we paid in 3%.  The techs paid in 5%.  Neither of us got a match from the state.  And on top of that, they are not pre-tax on the state level.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 08:32:34 AM
As a grad student I worked for the state of NY.  We had a pension system, we paid in 3%.  The techs paid in 5%.  Neither of us got a match from the state.  And on top of that, they are not pre-tax on the state level.

That isn't enough information to work with.  3% of what, your gross salary?   So say you were making $40k, you were paying in $1200 a year?   No state match...your 3% was just going into a saving account and would be used by the state to buy you an annuity with whatever was there?   It must have been a tiny tiny pension...after 25 years of a $1200 a year contribution, your pension would have been tiny tiny (less than $10,000 a year for sure).   Was it that low?
Title: Re: Effective federal income tax rate?
Post by: BlueHouse on April 08, 2015, 08:35:32 AM
On topic:  23.5%  Line 63 divided by Line 22. 
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 08:38:17 AM
Here is some info I found on the state of NY pension payouts (from 2011)

http://www.empirecenter.org/publications/measuring-average-public-pensions/ (http://www.empirecenter.org/publications/measuring-average-public-pensions/)

If you throw out the average, which including payments to people who did not put in a full term of service, the average pension benefit is over $55,000 a year!

That is a lot of tax deferral!
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 08, 2015, 08:38:38 AM
As a grad student I worked for the state of NY.  We had a pension system, we paid in 3%.  The techs paid in 5%.  Neither of us got a match from the state.  And on top of that, they are not pre-tax on the state level.

That isn't enough information to work with.  3% of what, your gross salary?   So say you were making $40k, you were paying in $1200 a year?   No state match...your 3% was just going into a saving account and would be used by the state to buy you an annuity with whatever was there?   It must have been a tiny tiny pension...after 25 years of a $1200 a year contribution, your pension would have been tiny tiny (less than $10,000 a year for sure).   Was it that low?
I paid in 3% of my gross salary which was $25,520 when I left, the techs ranged from 30K to 50K and you are right, it was tiny.  I can't remember exactly how much you could get but I think it was $300 and something per month if you had it the full five years.  Obviously the techs got more because they were in it for longer and paid more in.  The state invested it, just like they would any of the other pension money.  That is the point, many pensions are not that much unless you stay for a very long time.  Oh and it was not indexed to inflation.
Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 08:39:16 AM
Perhaps I should have said state, not federal.  It seems federal pension benefits are some of the lower ones.

It is very hard to find exact sources online for various salaries and pensions.

I did read awhile back that the average state pension is $25,000, which seems higher than almost all federal pensions except the highest earners.

My point was that these pensions allow for tax avoidance, or at least tax deferral.   This masks the income of the pensioner making them look poor compared to the "rich" guy who must save for all of his retirement.

The average cost to the state of offering pensions is 5% of salary: http://assets.aarp.org/www.aarp.org_/articles/work/contribution-requirements.pdf

This varies significantly by state: table 4 from http://www.massbudget.org/report_window.php?loc=Pension_3_11.html
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 08, 2015, 08:39:49 AM
Here is some info I found on the state of NY pension payouts (from 2011)

http://www.empirecenter.org/publications/measuring-average-public-pensions/ (http://www.empirecenter.org/publications/measuring-average-public-pensions/)

If you throw out the average, which including payments to people who did not put in a full term of service, the average pension benefit is over $55,000 a year!

That is a lot of tax deferral!
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.
Title: Re: Effective federal income tax rate?
Post by: mrshudson on April 08, 2015, 08:46:27 AM
10.6% - defined by total tax divided by gross income and 14% if you include only the W2 wage box - tax sheltered retirement contributions brought down our percentage.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 08:46:47 AM
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.

It is deferred.   You don't pay fed, state, SS, medicare tax on the portion of the pension that is funded by the state at the time they make the contribution and you don't pay any tax during the years that the money is growing.

If I save in a private fund, I immediately pay tax on my contribution and I pay any interest and dividend taxes every year.
Title: Re: Effective federal income tax rate?
Post by: Emilyngh on April 08, 2015, 08:47:16 AM
-1.4%

Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 08:50:54 AM
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.

It is deferred.   You don't pay fed, state, SS, medicare tax on the portion of the pension that is funded by the state at the time they make the contribution and you don't pay any tax during the years that the money is growing.

If I save in a private fund, I immediately pay tax on my contribution and I pay any interest and dividend taxes every year.

Then you're doing it wrong.  401ks allow for much higher self-created pensions than any government one.  And though that is subject to Social Security, you're also actually getting Social Security - which many state employees do not.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 08:53:32 AM
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.

It is deferred.   You don't pay fed, state, SS, medicare tax on the portion of the pension that is funded by the state at the time they make the contribution and you don't pay any tax during the years that the money is growing.

If I save in a private fund, I immediately pay tax on my contribution and I pay any interest and dividend taxes every year.

Then you're doing it wrong.  401ks allow for much higher self-created pensions than any government one.  And though that is subject to Social Security, you're also actually getting Social Security - which many state employees do not.

Most government workers are eligible for 401K or some similar plan.  Feds get TSP with salary match for some small %.   Most are eligible for SS.  The number is something like 80% of state workers are eligible for SS.
Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 08:57:19 AM
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.

It is deferred.   You don't pay fed, state, SS, medicare tax on the portion of the pension that is funded by the state at the time they make the contribution and you don't pay any tax during the years that the money is growing.

If I save in a private fund, I immediately pay tax on my contribution and I pay any interest and dividend taxes every year.

Then you're doing it wrong.  401ks allow for much higher self-created pensions than any government one.  And though that is subject to Social Security, you're also actually getting Social Security - which many state employees do not.

Most government workers are eligible for 401K or some similar plan.  Feds get TSP with salary match for some small %.   Most are eligible for SS.  The number is something like 80% of state workers are eligible for SS.

That's true.  But most government workers are also contributing to their pension.  For current federal workers, that's 4.4% of their paycheck.  In many cases employees would be better off self-funding and investing in the market.
Title: Re: Effective federal income tax rate?
Post by: Roland of Gilead on April 08, 2015, 09:03:21 AM
Can we just say the tax system is unfair and leave it at that?   There are millionaires who pay very little tax, corporations who offshore money, pensioners who paid little into a system, upper middle class who arrange enough deductions to pay near zero.

The only way to beat it is not to play at all.   That is my choice.
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 08, 2015, 12:56:03 PM
I'll give you one guess how many federal employees can retire at age 50 with a pension in excess of $50k.

The GS pay scale currently maxes out at ~$150,000/year including locality-specific bonuses, and to get that high you basically need to run a federal facility of some sort, like a supermax prison or the regional office for a cabinet level agency.  50k divided by 150k is 33.3 and federal pensions pay 1% per year of service, so you'd only need to work 33.3 years to get a $50k pension at the highest possible GS pay grade and step.  I guess maybe you could start at age 16 and then work your 33.3 years, and then retire at age 50 with $50k in pension.  See?  Totally possible.  Sort of.

Also, former Presidents of the United States receive a lifetime pension greater than $50k/year, and they are technically federal employees too.  Of course, none of them has ever been retired at age 50.  Kennedy would have been the first, had he survived a single 4 year term and not been re-elected.

But anyway, here is a possible example:

State/Federal civil engineer, making $70,000 a year, pays 5% of their salary into a pension fund, employer pays 15% (the figures are all over the place, some pay only a couple percent).   After 30 years they are eligible for a COLA'd pension of $45,000 per year, which is worth near $1,000,000 if purchased as an annuity from a private insurance company.

What are you basing those numbers on?  Why do you think a government employee who makes $70k/year gets a $45k/year pension?  That would require 45/70 times 1% per year would mean that person had to work 64 years to get that pension.  Even if they started at 18, that person's life expectancy at age 64+18=82 is short enough that even a pension of $100k/year wouldn't get back out everything they had paid in.

I think you have some serious misconceptions about how the federal pension system works.

Interesting case study.  I wonder if anyone hit GS15-10 at age 50 with 33.3 years of service.  I'm thinking no, if only because I doubt anyone who reaches that level doesn't have a college education.

Actually, I was thinking along the same lines as your second paragraph - members of Congress who serve 20 years get a pension in excess of 50k too - because they get 1.7% per year for their first 20 years of service.  So a Representative has to be elected by age 30, and a senator would have to be elected exactly at age 30 I'm order to get 20 years of service before they turn 51.  Of course, there's only 1 Representative in Congress who was elected at age 30, and the youngest Senator was 36 when he was elected, so in practice this doesn't happen very often. But it's totally technically possible.

Don't forget the MRA (Minimum retirement age).  For those who have less than 30 years, they can only start drawing their pension at age 60 with 20 years and at age 62 with 5 years.  Also, anyone in office before 1986 is under CSRS and those afterwards are under FERS.  I've earned my pension, paid into my pension and will take it when I can but I'm far from rich.
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 08, 2015, 01:00:07 PM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 01:01:17 PM
Don't forget the MRA (Minimum retirement age).  For those who have less than 30 years, they can only start drawing their pension at age 60 with 20 years and at age 62 with 5 years.  Also, anyone in office before 1986 is under CSRS and those afterwards are under FERS.  I've earned my pension, paid into my pension and will take it when I can but I'm far from rich.

Yeah, it turns out MRA for members of Congress is 50, if they have 20 years of Federal service, with at least 10 of those in Congress.  Interesting, no?
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 08, 2015, 01:12:45 PM
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.

It is deferred.   You don't pay fed, state, SS, medicare tax on the portion of the pension that is funded by the state at the time they make the contribution and you don't pay any tax during the years that the money is growing.

If I save in a private fund, I immediately pay tax on my contribution and I pay any interest and dividend taxes every year.

Then you're doing it wrong.  401ks allow for much higher self-created pensions than any government one.  And though that is subject to Social Security, you're also actually getting Social Security - which many state employees do not.

Most government workers are eligible for 401K or some similar plan.  Feds get TSP with salary match for some small %.   Most are eligible for SS.  The number is something like 80% of state workers are eligible for SS.

Federal employees under CSRS do not receive any 401K (TSP) matching.  They do not contribute to OASDI.  They pay 6.2% into their retirement.  Unless they had a second job and paid into Social Security they are not covered and never eligible including surviving spouse (called the windfall elimination act).  They must work a minimum of 30 years and be at least 55 years old.  Their retirement is 2% of their high three year average X years of service, less 2% off the top, to a maximum of 80%.  It takes 41 years of work to get the max.

Federal employees under FERS receive up to 5% in matching 401k (TSP).  The older ones pay 0.8% into their pension and the full 6.2% into OASDI (we are not counting medicare 1.45% because everyone pays that).  Their retirement is 1% of their high three average X years of service.  Minimum retirement age is 56 (and is scaled) and minimum length of service is 30 years. 

These figures do not include Congress and MAY not include special pays (LEOs,etc who must retire at 57 y/0).


My mothers retirement is 31 years of service at 55.  31 X 2% (62% - 2% = 60%).  She will never be eligible for social security.

Mine is this (If I retire at 56).  34 years of service X1% of my high three or 34% of my average high three salary plus full social security (I pay for it) plus whatever I've managed to put into my TSP.  My retirement will be comfortable but I will not be rich AND  my retirement is taxable as well.
Title: Re: Effective federal income tax rate?
Post by: ShoulderThingThatGoesUp on April 08, 2015, 01:35:17 PM
Federal income tax alone, about 2%. Obviously more for PA + school district + borough + property tax + FICA + SS.
Title: Re: Effective federal income tax rate?
Post by: BlueHouse on April 08, 2015, 01:43:02 PM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Not sure how that's relevant to the subject of this thread, especially considering that the majority of my income doesn't come from w-2 wages. 
The topic is about effective rates, not about how much tax we pay vs earned income.
Title: Re: Effective federal income tax rate?
Post by: Kriegsspiel on April 08, 2015, 02:06:10 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?
Title: Re: Effective federal income tax rate?
Post by: sol on April 08, 2015, 02:07:32 PM
Don't forget the MRA (Minimum retirement age).  For those who have less than 30 years, they can only start drawing their pension at age 60 with 20 years and at age 62 with 5 years.  Also, anyone in office before 1986 is under CSRS and those afterwards are under FERS.  I've earned my pension, paid into my pension and will take it when I can but I'm far from rich.

Yeah, it turns out MRA for members of Congress is 50, if they have 20 years of Federal service, with at least 10 of those in Congress.  Interesting, no?

Also some specialty groups like federal law enforcement and air traffic controllers can retire at 50. 

And the rest of us can retire and then defer pensions until our MRA, so I was kind of giving Roland the benefit of the doubt by assuming that when he said you could retire at 50 and get a pension he really meant you could retire at 50 and then get a pension at age 62, or age 57 if you're willing to take a reduced payout.  There's no inflation adjustment for those years though, so retiring and deferring also costs you money in purchasing power every year.

I've just never understood the anger some people have against government pensions, given how shitty they are.  I'd be much better off if they just paid me the dollars they are currently diverting from my salary to fund my pension, and that's more true the earlier you intend to retire.  The pension only breaks even for someone who works a looong career to accumulate all those 1% years.
Title: Re: Effective federal income tax rate?
Post by: beltim on April 08, 2015, 02:15:22 PM
Don't forget the MRA (Minimum retirement age).  For those who have less than 30 years, they can only start drawing their pension at age 60 with 20 years and at age 62 with 5 years.  Also, anyone in office before 1986 is under CSRS and those afterwards are under FERS.  I've earned my pension, paid into my pension and will take it when I can but I'm far from rich.

Yeah, it turns out MRA for members of Congress is 50, if they have 20 years of Federal service, with at least 10 of those in Congress.  Interesting, no?

Also some specialty groups like federal law enforcement and air traffic controllers can retire at 50. 

And the rest of us can retire and then defer pensions until our MRA, so I was kind of giving Roland the benefit of the doubt by assuming that when he said you could retire at 50 and get a pension he really meant you could retire at 50 and then get a pension at age 62, or age 57 if you're willing to take a reduced payout.  There's no inflation adjustment for those years though, so retiring and deferring also costs you money in purchasing power every year.

I've just never understood the anger some people have against government pensions, given how shitty they are.  I'd be much better off if they just paid me the dollars they are currently diverting from my salary to fund my pension, and that's more true the earlier you intend to retire.  The pension only breaks even for someone who works a looong career to accumulate all those 1% years.

I think people hear abuses of the system - the police officer who gets a ton of overtime in his last year to raise his pension (which starts at 50 or 55) higher than his actual salary and think that all pensions are that generous.  When, it actuality, those abuses are rare, the loopholes those abuses fit through are closes, and pensions actually only cost government 1-10% of salary for the overwhelming majority of employees.  But that doesn't make the news, and so people don't learn the actual facts.
Title: Re: Effective federal income tax rate?
Post by: ShoulderThingThatGoesUp on April 08, 2015, 02:19:41 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

Some of our income was capital gains. Heavy 401k contributions and tIRA contributions reduced taxable income out of the range where any capital gains taxes are paid. Standard deduction further knocked down taxable income, and child tax credit helped too.
Title: Re: Effective federal income tax rate?
Post by: sol on April 08, 2015, 02:29:32 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

We paid under 4 percent this year, so I'll play.  Short answer: kids and solar panels generate tax credits.

We have two professional incomes, we both max out our TSP/401k, and then we have a dependent care account, FSA and this year HSA for reducing taxable income. 

Rental real estate depreciation exceeds our rental income by a few thousand $/yr, so that reduces our AGI further.

We itemize, own an expensive home and so get to deduct high property taxes, give to charity, and live in a state with no income tax so we get to deduct sales tax.

We get to claim 4 exemptions for our family.

After all that our tax rate would normally be about 9%.  But then we get tax credits like the child tax credit and dependent care expenses, and this year a big one for the federal solar energy rebate.

For families with kids and making less than us, getting the above mentioned negative rates is pretty easy.  They aren't earning anything in the 28% bracket like we are, they get larger child tax credits, and then the EITC is worth up to $6k/yr in free money as long as you work enough. Kids in college also create deductible expenses, but we're not there yet.



Title: Re: Effective federal income tax rate?
Post by: BlueHouse on April 08, 2015, 02:32:48 PM
I've just never understood the anger some people have against government pensions, given how shitty they are.
Envy. 
Quote
I'd be much better off if they just paid me the dollars they are currently diverting from my salary to fund my pension, and that's more true the earlier you intend to retire.  The pension only breaks even for someone who works a looong career to accumulate all those 1% years.
I think if they had done that from the start, you may not have saved as much.  And that's really the difference.  When we're young and foolish, we don't save it.  Once we get older, we wish someone had forced us to save it. 
As for the loooooong career, I work with engineers who started working here when they were in high school.  Those years count toward their retirement dates, so I work with a 30-something year old who is eligible for retirement far in advance of most of the other.  Also, they paid for some portion of her education.  Not sure how it affects her payout, but in terms of dates, she's eligible super-young.
Title: Re: Effective federal income tax rate?
Post by: infogoon on April 08, 2015, 02:33:30 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

One moderate income for a family of five.
Title: Re: Effective federal income tax rate?
Post by: wenchsenior on April 08, 2015, 02:36:20 PM
Sol, I don't get it either. I mean, if you are totally anti government (hardcore libertarian or whatever), then you just don't want to pay people with your tax money to work for the government. So whatever.

But beyond that, I suspect it's just reflexive, mostly ignorant, ideas about what kinds of work federal employees do, how much schooling and how many degrees are required for those jobs, and strange ideas about monster pay checks, free healthcare, giant pensions, and other imaginary bennies. Partly might be due to the fact that many people only notice/encounter low-level admin or paper pushing feds, and studies do show that their overall benefits package tends to be a bit above the private sector. But the majority of feds are high-skill, multi-degree people in STEM fields or health care, plus a lot of actuarial types. They are paid well, IMO, and I'm appreciative that we will have a decent pension for my husband's work. But it's not going to be ginormous or anything.

It's kind of like the incredibly common misconception that Members of Congress get THEIR SALARY AND FREE HEALTH CARE FOR LIFE FOREVER ONCE THEY ARE ELECTED THOSE BASTARDS! People believe what makes them feel good, even if it's amazingly inaccurate.

State and city pensions are another thing. Extremely variable, and some are definitely totally out of control.
Title: Re: Effective federal income tax rate?
Post by: infogoon on April 08, 2015, 02:36:45 PM
I think people hear abuses of the system - the police officer who gets a ton of overtime in his last year to raise his pension (which starts at 50 or 55) higher than his actual salary and think that all pensions are that generous.

People have a strong confirmation bias for remembering this sort of thing, especially if they're already opposed to government pensions (or other spending). I'm involved in a discussion on another forum about the Missouri bill to ban SNAP recipients from purchasing certain foods, and people insist on anecdotal evidence from one customer when they worked in a grocery store in the mid-to-late-1980s as a valid data point.
Title: Re: Effective federal income tax rate?
Post by: wenchsenior on April 08, 2015, 02:40:13 PM
On topic, as is typical with this forum, you guys are inspiring me. I thought we were doing awesomely this year, with a two earner household, no dependents, with an effective tax rate of 11.4% (on a savings rate of just under 50% of net income, which I'm proud of).

Now, of course, I'm wanting to figure out how to squeeze some MORE money into a tax shelter next year LOL.

Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 08, 2015, 05:42:03 PM
Except that it is not deferred at the state level, as I said.  Also NYC costs pull it up.

It is deferred.   You don't pay fed, state, SS, medicare tax on the portion of the pension that is funded by the state at the time they make the contribution and you don't pay any tax during the years that the money is growing.

If I save in a private fund, I immediately pay tax on my contribution and I pay any interest and dividend taxes every year.
As I said, it is not pre-tax to the state and it is not funded by the state, I pay a portion of my salary into it and it is NOT matched by the state.  It is run by the state.
Title: Re: Effective federal income tax rate?
Post by: alsoknownasDean on April 08, 2015, 07:16:37 PM
My effective tax rate is in the low 20% range (including a 2% Medicare levy). Probably about 21-22%, but I'll find out when I do my return later this year.

My marginal rate is 32.5% + the Medicare levy. I also have HELP (student loan) deductions.

No state or local income taxes here.
Title: Re: Effective federal income tax rate?
Post by: Emilyngh on April 08, 2015, 07:27:26 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

We are a family of three with a SAHP and one earner making a middle income.  We put enough in the earner's 401k to keep our AGI low enough to qualify for the saver's credit (to get the largest credit possible we also have to put $2k in the SAHP's IRA), and a small amount of EITC, and qualify for the child tax credit (with a refundable portion), and thus wind up with a slightly negative liability (0 liability with some refundable credits).

TL;DR we keep expenses low enough to be able to live on what's left of a single middle-income after staching as much as we can in pre-tax accounts.

If you want to see a cool example of how someone else has done it with an income higher than ours, check out this awesome Root of Good blog post:    http://rootofgood.com/make-six-figure-income-pay-no-tax/



Title: Re: Effective federal income tax rate?
Post by: Unique User on April 08, 2015, 07:42:10 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

We paid under 4 percent this year, so I'll play.  Short answer: kids and solar panels generate tax credits.

We have two professional incomes, we both max out our TSP/401k, and then we have a dependent care account, FSA and this year HSA for reducing taxable income. 

Rental real estate depreciation exceeds our rental income by a few thousand $/yr, so that reduces our AGI further.

We itemize, own an expensive home and so get to deduct high property taxes, give to charity, and live in a state with no income tax so we get to deduct sales tax.

We get to claim 4 exemptions for our family.

After all that our tax rate would normally be about 9%.  But then we get tax credits like the child tax credit and dependent care expenses, and this year a big one for the federal solar energy rebate.

For families with kids and making less than us, getting the above mentioned negative rates is pretty easy.  They aren't earning anything in the 28% bracket like we are, they get larger child tax credits, and then the EITC is worth up to $6k/yr in free money as long as you work enough. Kids in college also create deductible expenses, but we're not there yet.

Similar situation, we are at 5.3% of our gross for federal taxes only, state taxes, SS and Medicare bumps us up to 14.9%. 

We have two professional incomes, we both max out our 401ks, as well as our FSA and HSA to get us close to the threshold for deducting traditional IRA contributions.  Helps that one of us is over 50 so the max for the 401k is higher.  Rental real estate depreciation exceeds our rental income, so that gets us right to the threshold.  We max out our traditional IRAs, take the standard deduction, have 3 exemptions, one child tax credit and we end up with minimal taxes. 
Title: Re: Effective federal income tax rate?
Post by: Cressida on April 08, 2015, 10:15:16 PM
Just finished ours, finally. Looks like about 16%. We had a couple of unfortunate situations though - one was self-employment tax even though DH was really effectively an employee, and the other was an utterly bogus "high earner" limitation on DH's 401(k) contributions (on his second job). Neither of those will be the case in 2015, so, things should be better.

Oh, and yeah, people should lay off the government pension hate. It's ignorance.
Title: Re: Effective federal income tax rate?
Post by: CCCA on April 08, 2015, 10:34:21 PM
turbotax says 3.83% (total federal tax/AGI)
But it would be even lower if you really count our real total income (which are reduced on our tax forms by subtracting the amount we contribute to workplace retirement), at around 3.2%. 
Title: Re: Effective federal income tax rate?
Post by: nottoolatetostart on April 09, 2015, 03:47:42 AM
Turbotax says 19.97%, but should be lower if you count the tax deferred options like 401k, HSA.

2 incomes, 2 kids. It's "lower" than ever thanks to the advice from this broader community.
Title: Re: Effective federal income tax rate?
Post by: Ottawa on April 09, 2015, 05:42:46 AM
Canada (Ontario)

Federal Income tax & Contributions = 18.4%

Total tax on total gross income all sources, household = 15.9%
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 09, 2015, 06:00:16 AM
If retired under the special provision for Members of Congress or Congressional Employees
2.5% of your high-3 average salary multiplied by your years and months of service as a Member of Congress and/or Congressional Employee, your military service while on a leave of absence as a Member and up to 5 years of other military service, PLUS
1.75% of your high-3 average salary multiplied by your years of other service, which when added to your years of 2.5% service, do not exceed 10 years, PLUS
2% of your high-3 average salary multiplied by your years of other service in excess of 10 years


The above from the OPM website.  It is a good gig if you can get it.  On the other hand, it is expensive to live in DC and you are required to maintain a home in your district. 
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 09, 2015, 06:06:54 AM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Not sure how that's relevant to the subject of this thread, especially considering that the majority of my income doesn't come from w-2 wages. 
The topic is about effective rates, not about how much tax we pay vs earned income.

Because the original question was federal income taxes paid vs gross income.  Line 22 can account for losses which would make it net income vs gross income.  It is indeed about how much you pay vs how much you earned (as in, income from all sources). 
Title: Re: Effective federal income tax rate?
Post by: teen persuasion on April 09, 2015, 06:59:59 AM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Not sure how that's relevant to the subject of this thread, especially considering that the majority of my income doesn't come from w-2 wages. 
The topic is about effective rates, not about how much tax we pay vs earned income.

Because the original question was federal income taxes paid vs gross income.  Line 22 can account for losses which would make it net income vs gross income.  It is indeed about how much you pay vs how much you earned (as in, income from all sources).

I was lazy and just used TurboTax's number, but now I see that that is using AGI, not gross income.  Calculating using gross income I get -12.32% fed only.

It is difficult to just reference a line from the 1040 and have it work for everyone.  E.g., many are using line 63 , but that is zero for me.  However I have refundable credits, so line 74 is what I use.  If we'd had any withholding, I'd need to back that out first.
Title: Re: Effective federal income tax rate?
Post by: ShoulderThingThatGoesUp on April 09, 2015, 07:27:49 AM
Oh, and yeah, people should lay off the government pension hate. It's ignorance.

I know that most recipients simply want what they've earned, but it's difficult not to find them frustrating as a taxpayer when local governments are cutting services and raising taxes just to pay for pensions. It was the elected officials' responsibility not to get in that situation (yeah, your pension fund will earn 8% every year, sounds legit) but they've proven they can't be responsible with it, so I'll never support a government pension going forward if there's anything I can do to prevent it from happening.

And there are systems that allow for ridiculous pension goosing, but I recognize that most people don't do that and it's not most of the systems.
Title: Re: Effective federal income tax rate?
Post by: wenchsenior on April 09, 2015, 07:43:11 AM
If retired under the special provision for Members of Congress or Congressional Employees
2.5% of your high-3 average salary multiplied by your years and months of service as a Member of Congress and/or Congressional Employee, your military service while on a leave of absence as a Member and up to 5 years of other military service, PLUS
1.75% of your high-3 average salary multiplied by your years of other service, which when added to your years of 2.5% service, do not exceed 10 years, PLUS
2% of your high-3 average salary multiplied by your years of other service in excess of 10 years


The above from the OPM website.  It is a good gig if you can get it.  On the other hand, it is expensive to live in DC and you are required to maintain a home in your district.

Yes, but I think that computation is under CSCS system, where their service didn't include payment into and eligibility for SS. That system ended in 1983 or 84. That's more than 30 years ago! So anyone elected for the first time after that is under FERS, which isn't nearly that generous. 

Title: Re: Effective federal income tax rate?
Post by: charis on April 09, 2015, 07:51:22 AM
Back on topic - We were at 3.1% (one income in the 25% tax bracket with max IRAs, HSA, mortgage interest, student loan interest, high property taxes, and 2 kids).
Title: Re: Effective federal income tax rate?
Post by: frugalnacho on April 09, 2015, 08:47:59 AM
0%

Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

Married filing jointly.  I earned about 60k.

+60k
-8k into IRAs (just enough to get our taxes to zero, then we put some additional into ROTH)
-16k into 401k
-12.4k standard deduction
-7.9k two exemptions
=15.7k

That left me with $15,700 of taxable income, which all gets taxed at 10% for MFJ, which is a tax of $1,570.   We contributed enough into 401k and IRAs to get our AGI to exactly 36k which qualified us for the highest multiplier of the tax savers credit, so we got a non refundable tax credit of $2,000 which wiped our tax bill out.  We actually left several hundred dollars of that tax savers credit on the table because we owed less than $2,000 to start with. 

I'm not sure how anyone would utilize more of that credit though, as a single dollar more on our AGI would reduce the credit from $2000 to $800 and only up our tax bill by 10 cents.
Title: Re: Effective federal income tax rate?
Post by: johnhenry on April 09, 2015, 10:19:32 AM
0.38% Federal only.

16.00% counting Fed, SS, Medicare, State, Local

Married, 2 kids, single income.  We max Roth IRAs and 401k up to match.
Title: Re: Effective federal income tax rate?
Post by: mm1970 on April 09, 2015, 10:23:21 AM
you are reminding me we should do our taxes this weekend
Title: Re: Effective federal income tax rate?
Post by: seattleite on April 09, 2015, 10:45:12 PM
26.12% - I was dreading that calculation, though it was less than I thought it would be.
Title: Re: Effective federal income tax rate?
Post by: webguy on April 10, 2015, 11:05:17 AM
Just finished my taxes today!!

Federal Effective Tax Rate: 32.9%
State Effective Tax Rate: 7.1%

Married filing jointly, single income from business, maxed out all tax-deferred accounts. I'm guessing the self-employment tax is what stung us.
Title: Re: Effective federal income tax rate?
Post by: begood on April 10, 2015, 11:16:44 AM
Y'all, I am SOOOO bad at this.

When I do this:  Line 63 divided by Line 22

In other words SMALLER number (taxes paid-Line 63) divided by BIGGER number (Line 22-total income), I get .13 - does that mean 13%?
Title: Re: Effective federal income tax rate?
Post by: BlueHouse on April 10, 2015, 11:47:07 AM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Not sure how that's relevant to the subject of this thread, especially considering that the majority of my income doesn't come from w-2 wages. 
The topic is about effective rates, not about how much tax we pay vs earned income.

Because the original question was federal income taxes paid vs gross income.  Line 22 can account for losses which would make it net income vs gross income.  It is indeed about how much you pay vs how much you earned (as in, income from all sources).
Fair enough.  Do you want that with or without AMT? 
Title: Re: Effective federal income tax rate?
Post by: merula on April 10, 2015, 11:48:44 AM
Y'all, I am SOOOO bad at this.

When I do this:  Line 63 divided by Line 22

In other words SMALLER number (taxes paid-Line 63) divided by BIGGER number (Line 22-total income), I get .13 - does that mean 13%?

My calculation is my tax liability (line 63 on 1040) divided by my total income. This could be line 22, but for me it isn't because my W-2 salary doesn't include health insurance premiums, bus passes or life insurance.
Title: Re: Effective federal income tax rate?
Post by: enigmaT120 on April 10, 2015, 04:08:36 PM
Mine was 8.something, using TurboTax's figure.  Just my income with some SSA income from my wife that I had to pay taxes on.  No kids, no mortgage interest, nowhere near the 25% tax bracket.  I did sell some mutual fund shares to buy my car, but I'm in the zero per cent capital gains tax rate. 

I'm a fed -- GS9 step 10.  I learned a couple of years ago that I have enough years in that, if fired, I could draw my pension immediately which would be about 16,000 per year.  So every time my boss calls me (he works 300 miles away) I ask him if I'm fired yet. 
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 13, 2015, 11:46:58 AM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Not sure how that's relevant to the subject of this thread, especially considering that the majority of my income doesn't come from w-2 wages. 
The topic is about effective rates, not about how much tax we pay vs earned income.

Because the original question was federal income taxes paid vs gross income.  Line 22 can account for losses which would make it net income vs gross income.  It is indeed about how much you pay vs how much you earned (as in, income from all sources).
Fair enough.  Do you want that with or without AMT?

Which one did you actually use :)?  My rate went down this year because I bought a rental (net loss).  When ever I hear people bitch and moan about how much they paid (which isn't usually the "real" truth) I just smile.  I can't wait to be in the 39.9% window. 
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 13, 2015, 11:48:29 AM
Mine was 8.something, using TurboTax's figure.  Just my income with some SSA income from my wife that I had to pay taxes on.  No kids, no mortgage interest, nowhere near the 25% tax bracket.  I did sell some mutual fund shares to buy my car, but I'm in the zero per cent capital gains tax rate. 

I'm a fed -- GS9 step 10.  I learned a couple of years ago that I have enough years in that, if fired, I could draw my pension immediately which would be about 16,000 per year.  So every time my boss calls me (he works 300 miles away) I ask him if I'm fired yet.

I'm usually the first in the office so I check to see if there is an empty cardboard box in my chair.
Title: Re: Effective federal income tax rate?
Post by: Drifterrider on April 13, 2015, 12:04:56 PM
Can some of you guys who have these low single digit returns explain how, if it's something the rest of us could replicate?

Using the original question I divided my gross earnings by my federal tax liability to get 8.6%.
If I used my gross earnings for social security I get 11.15% (I max my 401K plus the over 50 catch up).
If I use my net earnings (I had a rental property loss) I get 12.6%
If I use my net taxable earnings (after all deductions) I get 17.75%

The largest item for me is the deferral on my 401K. 

So, when you hear people talking about 25%, 28% etc., they are not giving you the real numbers OR they make a LOT of money (which isn't a bad thing either).

Tax deferrals help the most with most people.  BUT, Uncle Sam will get his back on the back end.
Title: Re: Effective federal income tax rate?
Post by: hdatontodo on April 13, 2015, 12:47:19 PM
Y'all, I am SOOOO bad at this.

When I do this:  Line 63 divided by Line 22

In other words SMALLER number (taxes paid-Line 63) divided by BIGGER number (Line 22-total income), I get .13 - does that mean 13%?

Seems right. Remember per cent mean per 100 which is why you multiple .13 X 100 to get 13% (13 per hundred)
Title: Re: Effective federal income tax rate?
Post by: GardenFun on April 13, 2015, 01:11:11 PM
6.1%. 

Could put more in 401k and tIRA vs. Roth IRA's.  Even with maxing out both tax deferral retirement options, we're still in the 15% tax bracket and wouldn't qualify for the saver's credit.  But it would drop the overall rate a few %. 

I use Roth IRA's as a hedge against the following issues:
- 401k withdrawals along with potential inherited IRA RMD's will push us into a higher tax bracket in retirement.
- Income tax rates will creep upward over time. 

No HSA option and flex spend isn't beneficial due to SAHP.   
Title: Re: Effective federal income tax rate?
Post by: Philociraptor on April 13, 2015, 01:52:02 PM
Right around 13% federal, plus 7.65% FICA (DINKs). Not even gonna try figuring sales/excises taxes.
Title: Re: Effective federal income tax rate?
Post by: bacchi on April 13, 2015, 02:52:39 PM
10.1%, line 63/line 22 (adjusted for 1/2 of SE tax).

single, high property taxes, 50% solo 401k match, HSA
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 13, 2015, 06:44:48 PM
10.1%, line 63/line 22 (adjusted for 1/2 of SE tax).

single, high property taxes, 50% solo 401k match, HSA
I thought the match could only be 25% for a solo 401k?
Title: Re: Effective federal income tax rate?
Post by: Kriegsspiel on April 13, 2015, 06:49:56 PM
10.1%, line 63/line 22 (adjusted for 1/2 of SE tax).

single, high property taxes, 50% solo 401k match, HSA
I thought the match could only be 25% for a solo 401k?

If the solo is like an individual, only the first 25% is tax deductible, but you can match up to 100% of $53,000 if you want.
Title: Re: Effective federal income tax rate?
Post by: mm1970 on April 14, 2015, 09:34:28 AM
Today it looks like 17.9%.  But we owe $10k, and that seems...high.  We earned $30k more (mostly because I went back to work full time) and we have to pay $14k more?  It's not like they weren't taking taxes out of my additional income.  We are in the 28% bracket with a little bit in the 33%.

The maths isn't working out quite right, but we are reviewing (I don't normally review the taxes much, and I have to say, a 100+ document, late at night after a full work day and 2 kids?  Oy.)

In any event, most of the issue seems to be deductions and credits.  We paid a lot less in interest on the mortgage last year.  The other major issue seems to be child care credit, because my husband didn't put in the cost of after school care and summer/ winter camps in there.  I *think* once we get those in there we'll knock that down to $7k, which can be explained by paying a lot less mortgage interest.

I spent a lot of time last night reading my work email and personal email where we were discussing when our son was going to be in camp. Ugh.
Title: Re: Effective federal income tax rate?
Post by: Gin1984 on April 14, 2015, 09:38:36 AM
10.1%, line 63/line 22 (adjusted for 1/2 of SE tax).

single, high property taxes, 50% solo 401k match, HSA
I thought the match could only be 25% for a solo 401k?

If the solo is like an individual, only the first 25% is tax deductible, but you can match up to 100% of $53,000 if you want.
Yes, solo 401k and individual 401k are the same type of 401k.
Title: Re: Effective federal income tax rate?
Post by: BlueHouse on April 14, 2015, 12:29:43 PM
On topic:  23.5%  Line 63 divided by Line 22.

BUT.....what were your earnings (Box 3 of your W-2) divided by line 63?
Not sure how that's relevant to the subject of this thread, especially considering that the majority of my income doesn't come from w-2 wages. 
The topic is about effective rates, not about how much tax we pay vs earned income.

Because the original question was federal income taxes paid vs gross income.  Line 22 can account for losses which would make it net income vs gross income.  It is indeed about how much you pay vs how much you earned (as in, income from all sources).
Fair enough.  Do you want that with or without AMT?

Which one did you actually use :)?  My rate went down this year because I bought a rental (net loss).  When ever I hear people bitch and moan about how much they paid (which isn't usually the "real" truth) I just smile.  I can't wait to be in the 39.9% window.
I paid AMT so it is included in the total tax paid.  Total tax paid was 23.5% of gross earnings (I had no losses, or rather I cannot claim the losses I did incur from rental due to income).  It hurt so much because I had to make an additional check out for $20K (not already included in withholding or in estimated taxes).  I screwed up because I forgot to tell my Acct that I was going to earn $50K more than the previous year.  I admit, it's not a bad problem, but I do want to plan better in the future.     
Title: Re: Effective federal income tax rate?
Post by: bacchi on April 14, 2015, 12:40:48 PM
10.1%, line 63/line 22 (adjusted for 1/2 of SE tax).

single, high property taxes, 50% solo 401k match, HSA
I thought the match could only be 25% for a solo 401k?

If the solo is like an individual, only the first 25% is tax deductible, but you can match up to 100% of $53,000 if you want.

Right, I put in $17.5k and then did an "employer" contribution for a total of ~$26.25k.