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Tax increases show no effect

 

Claude Dohrn
(@tomato)
New MemberCustomer
Joined: 3 months ago
Posts: 4
Topic starter  

Perhaps I’m doing something wrong, but even when I enter massive federal tax increases (25%) and large annual income ($2M) and 2022 reversion, the marginal tax rate doesn’t go higher than 39.6%. What am I doing wrong?


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Stuart Matthews
(@smatthews51)
MemberAdmin
Joined: 9 months ago
Posts: 146
 

Claude,

You're not doing anything wrong. 39.6% is the highest tax bracket.


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Claude Dohrn
(@tomato)
New MemberCustomer
Joined: 3 months ago
Posts: 4
Topic starter  

@smatthews51, well then I guess I’d like to request an enhancement. IMO, it’s not inconceivable that tax rates will go up from where they currently are, and I’d like to be able to model how much, if any, Roth conversions I should be doing. That’s the biggest reason I purchased the software; I already know that we will have sufficient funds for retirement.


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Stuart Matthews
(@smatthews51)
MemberAdmin
Joined: 9 months ago
Posts: 146
 

Given that what you're talking about is complete guesswork, I'd respectfully suggest that you can accomplish the same thing by just increasing the federal taxes via some percentage on the Home page. The maximum tax rate won't change but the overall taxes will be multiplied by the specified amount.


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Claude Dohrn
(@tomato)
New MemberCustomer
Joined: 3 months ago
Posts: 4
Topic starter  

I don’t know that it’s complete guesswork, as much of this has already been discussed in Congress. I know it’s a long road between talk and law, but still.

if I put 25% tax change on the Home page, are you saying that the taxes will increase proportionally and that the increased amount will be used as the basis for computations/optimizations (eg, Roth conversions) even if the max marginal tax rate doesn’t reflect it? I will run the software when I’m near a PC again.

thanks.


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Claude Dohrn
(@tomato)
New MemberCustomer
Joined: 3 months ago
Posts: 4
Topic starter  

I believe that what’s currently in the software is sufficient. It tells me my effective tax rate and adjusts the tax amounts as one would expect; I haven’t checked the math, but have faith that it’s correct.

thanks. Nice software btw.

This post was modified 1 week ago by Claude Dohrn

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Bill Hines, Retirement Planner
(@hines202)
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Joined: 5 months ago
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Won't the checkbox about the 2017 tax cuts and jobs act affect this as well? If that's undone, taxes will go up, perhaps this is what Claude is alluding to?

Bill Hines
Financial Counselor/Retirement Planner
Money Coach Group, Inc
https://moneycoachgroup.com
bill@moneycoachgroup.com


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Stuart Matthews
(@smatthews51)
MemberAdmin
Joined: 9 months ago
Posts: 146
 

@tomato Yes, the tax increase percentage specified on the Home page is used to increase the computed taxes proportionately and that figure is used in Roth conversion calculations.


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Stuart Matthews
(@smatthews51)
MemberAdmin
Joined: 9 months ago
Posts: 146
 

@hines202 There isn't actually a checkbox for the TCJA of 2017 but, rather, a data entry field for specifying the year in which taxes revert to the prior tax law. Regardless of which tax law is in effect, both are affected by the setting in the % increase field on the Home page.


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