- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
re: Employer 401k vs Roth 401K
Posted on 5/20/26 at 9:39 am to SETH6180
Posted on 5/20/26 at 9:39 am to SETH6180
You're taxed in buckets. So each dollar earned is taxed at the lowest possible rate, until you hit the next bucket.
For 178k income married/jointly filing, 32,200 standard deduct, taxable income 145,800.
First 24,800 is taxed at 10% - 2,480
24,800 to 100,800 taxed at 12% (76,000 * 12%) - 9,120
100,800 to 145,800 taxed at 22% (45,000 * 22%) - 9,900
Total Tax: 21,500
Effective rate: 21,500/178,000 x 100 = 12.08%. Changes if single or filing head of househould, but if jointly thats the number.
For 178k income married/jointly filing, 32,200 standard deduct, taxable income 145,800.
First 24,800 is taxed at 10% - 2,480
24,800 to 100,800 taxed at 12% (76,000 * 12%) - 9,120
100,800 to 145,800 taxed at 22% (45,000 * 22%) - 9,900
Total Tax: 21,500
Effective rate: 21,500/178,000 x 100 = 12.08%. Changes if single or filing head of househould, but if jointly thats the number.
0
Posted on 5/20/26 at 9:44 am to Everyday Is Saturday
quote:
transferring a Roth to children after death is tax free
I never knew this Thanks for this information
Posted on 5/20/26 at 10:28 am to LSUFanHouston
Plug those numbers in here and you will get a great visual to better understand the taxes marginal rate and effective rate. Be sure.to select flow for a better visual depiction. Thanks to the.poster that shared this a few days back engaging-data.com/tax-brackets/
Posted on 5/20/26 at 1:07 pm to notsince98
quote:
The image is about a 12% effective ta
Effective rate is a garbage stat when it comes to tax planning
Marginal rate is what matters
The tax rate you paid on dollars already earned has nothing to do with the tax rate on the next dollar earned
Posted on 5/20/26 at 1:18 pm to LSUFanHouston
Delete
This post was edited on 5/20/26 at 1:21 pm
Posted on 5/20/26 at 2:00 pm to LSUFanHouston
quote:
Effective rate is a garbage stat when it comes to tax planning
It matters a lot when running the numbers for evaluation.
Posted on 5/20/26 at 5:04 pm to notsince98
quote:
It matters a lot when running the numbers for evaluation.
Historical evaluation? I guess, but what use is that?
Future planning is what is important. If I go an additional X, what is my Y cost?
Everything else that makes up the effective rate is a sunk cost.
This post was edited on 5/20/26 at 5:05 pm
Posted on 5/20/26 at 5:30 pm to LSUFanHouston
Isn't effective rate useful to capture result of "If I go an additional X, what is my Y cost?"
Unless you assume the entire withdrawal falls in owners top marginal rate. Seems relevant to me when comparing withdrawal rate to tax rate on next dollar contributed at today's tax rate. Same for Roth conversion analysis.
Unless you assume the entire withdrawal falls in owners top marginal rate. Seems relevant to me when comparing withdrawal rate to tax rate on next dollar contributed at today's tax rate. Same for Roth conversion analysis.
This post was edited on 5/20/26 at 5:31 pm
Posted on 5/20/26 at 6:15 pm to TorchtheFlyingTiger
quote:
Isn't effective rate useful to capture result of "If I go an additional X, what is my Y cost?"
Absolutely not.
Let’s say you - without additional X - are at a 17% effective rate and a 24% marginal rate. Let’s also say you are $40,000 below the top of the 24% bracket.
You want to convert $25,000.
Are you paying a 17% rate or a 24% rate on that $25,000?
Also, if you have income taxed at the qualified rate, such as qualified dividends or long term gains, your effective rate is going to be different than if all the income was ordinary.
Let’s say instead of a $25.000 conversion, you are looking at $25,000 of additional long term capital gains.
Is your additional tax going to be the 17% effective… or at the 15% long term gains rate for that total income level? (Setting aside the issue of net investment income tax)
Effective rate might be a decent historical discussion at parties or message boards, but it’s garbage for tax planning,
Posted on 5/20/26 at 8:28 pm to LSUFanHouston
No when you are running simulations or case studies.
Posted on 5/20/26 at 8:41 pm to notsince98
quote:
No when you are running simulations or case studies.
If you are running total base calcs… but that’s not really tax planning as no decisions are being made.
No one uses - or should use - effective rate when determining impacts of additional income or deductions.
Page 3 of 3
Popular
Back to top
Follow TigerDroppings for LSU Football News