Did you know that taxes could consume more than 50 cents of every dollar earned by investors? The good news is that some straightforward steps could help you bring that number down significantly.
Determine your actual tax rate
Assuming maximum for all tax brackets, it's fair to assume your AGI is high enough in order for the Limitation on Itemized Deductions (PEASE) to apply to you. This limitation effectively adds 1.18% to your marginal tax rate. This assumption is reflected in the output.
Your marginal tax rate on investment incomeC
Tax Rate (Net)†*
Tax Rate (Net)†
Top Tax Rate
On Investment Income†D
Your marginal tax rate on various types of income
The output of this calculator is for educational purposes only and should not be considered investment, legal or tax advice. The output is general in nature and may not apply to your individual tax situation and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.
For more individualized information, you should consult your tax advisor or investment professional. You bear sole responsibility for any decisions you make based on the output of this calculator. The calculator makes certain assumptions that may not apply to you. The calculator has many inherent limitations and individual results may vary.
Tax rates and tax laws are updated through October 1, 2014. Rates are sourced from www.taxfoundation.org.
† The displayed rates have been rounded to the nearest hundredth of a percent. The Top Tax Rate on Investment Income may not add up to the displayed rates due to rounding.
* The state tax rate shown here is net of the benefit of the federal itemized deduction.
** In tax years beginning in 2013 and later, a 3.8 percent Net Investment Income Tax (NIIT) applies to individuals, estates and trusts that have net investment income above applicable threshold amounts. This is commonly referred to as the Health Care Tax.
1 In-state munis are exempt from both federal and state taxes. Local taxes may still apply, but are not factored in here. Private Activity Bonds are subject to AMT, and if a taxpayer is subject to the AMT they would be subject to federal tax.
2 Out-of-state munis are exempt from federal taxes, but not state and local taxes. Some out-of-state munis may also be exempt from state and local taxes, depending on your state and the state of the bond you purchase. Private Activity Bonds are subject to AMT, and if a taxpayer is subject to the AMT they would be subject to federal tax.
3 U.S. Treasurys are exempt from state taxes.
4 Other fixed income may include corporate bonds, floating-rate loans and other sovereign debt, among others.
5 Non-qualified dividends are a dividends on common stock that are intended to be paid periodically in equal amounts over the course of a year, typically quarterly, after being declared by the issuer of the stock.
6 Qualified dividends are ordinary dividends that meet specific criteria to be taxed at the lower long-term capital gains tax rate rather than at the higher tax rate for an individual's ordinary income.
7 Short-term capital gains are those associated with an investment that was held for one year or less. Most states tax capital gains at the same rate as ordinary income, and that is assumed here. Some exceptions may apply.
8 Long-term capital gains are those associated with an investment that was held for more than one full year. Most states tax capital gains at the same rate as ordinary income, and that is assumed here. Some exceptions may apply.
9 401(k) withdrawals are treated as ordinary income. It is assumed that only pretax dollars were contributed, and the entire withdrawal is taxed. Withdrawals before age 591/2 may be subject to an additional 10% penalty.
10 A traditional IRA offers some tax advantages. Contributions made to a traditional IRA may be fully or partially deductible. Generally speaking, amounts in a traditional IRA (including earnings and gains) are not taxed until distributed. Withdrawals must begin after reaching age 701/2.
11 A Roth IRA is generally not taxed if certain conditions are met. Contributions to a Roth IRA are not tax-deductible and can be made after reaching age 701/2. Qualified distributions may be tax-free if certain requirements are satisfied.