Posts Tagged ‘tax brackets’

Inflation Adjustments for 2015

September 22, 2014

inflation-rate-of-changeThe August inflation numbers, which came out September 17, are the last ones needed to adjust most of the tax figures that change annually, including the tax rate schedules. The IRS hasn’t published the adjusted figures, but we “did the math” and updated our Reference Room to give you an advance look at the 2015 numbers. Highlights include an increase in the personal exemption amount from this year’s $3,950 to a round $4,000. The IRA contribution limit (under age 50) will remain at $5,500. (The 401k contribution limit depends on September inflation numbers, so that information isn’t available yet.) The annual gift tax exclusion amount will be unchanged at $14,000.

Inflation for the twelve-month period ending in August was 1.7%.

ATRA Tax Rates

January 2, 2013

The American Taxpayer Relief Act of 2012 (“ATRA”) affects income tax rates for 2013 and subsequent years. These rates do not sunset, so they will not change (except for inflation adjustments) until Congress passes legislation amending the tax law.


Roth Conversions: Predicting Your Tax Bracket

May 10, 2010

A Roth conversion involves a tradeoff between the income tax you’ll pay on the amount converted and the income tax you would otherwise pay later on withdrawals from a traditional retirement account. This post is the second in a series on how to compare the conversion tax rate with the anticipated tax rate on withdrawals, or ATRW.  The previous one explained why the appropriate comparison is between the lowest rate that applies to conversion income and the highest rate that applies to withdrawals in retirement. The focus this time is on predicting the tax bracket that will apply to withdrawals, especially for people who are still working and more than a few years away from retirement. (more…)

Roth Conversions and Tax Rates

May 4, 2010

An important factor in determining whether to do a Roth conversion, and if so how much to convert, is the difference (if any) between the tax rate that would apply to a conversion and the rate that would apply to later withdrawals from the existing account if it is not converted. You might, for example, find that you’ll pay 28% on a conversion, while a projection indicates that if you don’t convert you’ll eventually pay 25% on withdrawals. I’m going to call this second number your anticipated tax rate on withdrawals, or ATRW.

It’s widely understood that having a conversion tax rate higher than ATRW makes a Roth conversion less attractive. Some have mistakenly concluded that it’s fatal. In reality, it’s possible for a Roth conversion to produce significant long-term benefits even in this situation. Before we examine the effect we should get a firmer grasp of the tax rates we’re comparing.


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