Tax Calculation
Federal and State taxes are unusually high, at least in current year. Here are the key amounts:
Inputs
Earned Income - 25,000
Regular Assets - 4,040,000
Share of taxable assets that are LTCG or Dividends - 100%
Caluclated
Regular Asset Income - 443,000
Federal Income Taxes - 165,268
Implied Average Tax Rate - 35%
Even if all of the asset income is taxed at individual rates, an average federal rate of 35% seems very high. Shouldn't the federal rate be a maximum of 15% since virtually all of the income is long term gains and dividends. (I am ignoring the fact that I have a significant basis in the assets and deductions, which should further reduce the average rate.)
RSS
I don't know which update you're using, but the latest and greatest is returning about 19% federal tax with your asset allocation and income stream. Again, we'll have to take a look at your database to be 100% sure you're getting right results. We found a problem with the AMT calculations this week and this may be the source of your problem.
Best,
Dick Munroe
I am using 2.9.74 and still getting very high tax amounts. I have changed my data some to attempt to simplify, but the numbers are still wrong. I am not a tax expert, but turbo tax tells me that if I had no income apart from $500,000 in qualified dividends, with my typical deductions (about $70,000) I would owe about 65,000 in taxes (15%) and there is only a tiny amt (<1000). ESP is telling me closer to 35% still.
Shall I send you my database?
Best,
Dick Munroe