I'm trying to figure out what my tax rate will be when I retire in a few years, but I'm no CPA. Suppose my spouse and I have total pension income of $100,000, take only the personal deductions, and live in California (9.3% tax rate, I think).

 Can anyone help me figure out my tax rate, so that I plan a retirement budget?

 Thanks. 

Your personal exemptions for you and your wife should be 7000 and the standard deduction is around 11000. So your taxable income should be 82000. At this level your probably at 25%. Add the 9.3 California state tax and your probably looking at 34.3%

Thank you, Ripper1, for your answer. 

Assuming you are married filing jointly, here's how you'd figure out your Federal  MARGINAL tax rate in 2008, or the tax rate you payed on the last dollar of income:

Gross Income (distributions from retirement plans, TIRA's and taxable accts), PLUS

85% of your household Social Security retirement benefits, MINUS

greater of $10,900 (standard deduction) or your itemized deductions, MINUS

$7,000 for personal exemptions, assuming its only you and your wife

This will give you, for 2008, your TAXABLE INCOME.

Your FEDERAL TAX will on this amount is determined (for 2008) as follows:

10% of the first $16,050 PLUS

15% of the amount between $16,050 and $65,100

This assumes you don't have any 'above the line' deductions on the front of your form 1040 (most retirees don't)

As to your CA tax, either you'll have to Google to a web site that will start with your Fed 1040 numbers to figure the tax or perhaps another poster can speak to this, as for most States, its not as easy as mulitplying your Fed Taxable income X State tax rate.

BruceM

 

Thanks for your answer. I appreciate you taking the time to help me understand this. 

You could also use Turbotax to give you both federal and state estimates for the future, based on this year's laws.

" Going to have a $100k yr income for retirement"

Re: If your going to have this much income? I think it would behove you to HAVE A CPA to consult with.. Mine only cost me $600/yr to both do my Taxes and Consulting and he is with a Firm of several others in different parts of the Business , inlcuding Estate Tax People to Lawyers..

And Muni's other Tax Lowering Investments might be more benficial for you..

And sure hope it's worth apying +$10k Yr  more to Live there vs AZ...It wasn't worth it for me..

Word has it ? Expect it to go to breaking +10% In the next few yrs..and eventually being the same as Fed Tax rates..(15% ) in the decades ahead..Espeically with the Illegal Immigrants problem and it's major $ Impact draining it's coffers taking care of them..

 

 

Don't forget to add in social security which will be 85% taxable income (federal) when you draw it.  Standard deduction for over 65 is 12,700 and personal expemption is 3400 each so your taxable income (without ss) would be about 80k which puts you in the 25% incremental bracket.  Actual tax is 12.8k so the effective tax rate federal is 13%.  Not sure about CA state tax.

 

jpr

How do I reconcile my tax bracket with my effective tax rate in determing MY return from muni bonds?

In the above post the bracket is 25% and the effective rate is 13%, how would I evaluate the return of a 5% muni bond?

Than ks

Roberta 

 

 

Roberta, you might play with this a bit..

http://download-v5.streamload.com/356d7842-5d38-427a-a3b5-ef6eddf5c4b3/financebuff/Hosted/Bond-Funds-Yield-Calculator.html

 

Paul