Effective Tax Rate 2008

[sweeps]

Ok, folks, it's that time of year again. Last year we discussed our effective tax rate as reported by TurboTax (or you can figure it out by dividing total tax paid by your adjusted gross income).

According to TurboTax my effective tax rate was 7.34%.

[ceejay74]

Me & NT:
Fed tax $7694
AGI $89727
ETR 8.6%

AS:
Fed tax $3261
AGI $39372
ETR 8.3%

Household combined total:
Fed tax $10955
AGI $129099
ETR 8.4%

Hope & Lifetime Learning credits made a big difference.

[loulou]

Mine's high...effective rate was 9.36%.

I think I need to have some kids.

[Caoineag]

10.53 etr and I was grateful it was that low. First time in the past couple of years we didn't owe close to the penalty level.

[MonkeyMama]

4.2% Fed & 0.7% State (Taxes divided by AGI).

However, my software calculates effective tax rate as taxes divided by "taxable income." This seems to be the proper definition.

For that I show 8.1% & 1.2% (Fed, State)

Since we have kids we have paid little in incomes taxes. This was our biggest year since kids. That being said, kids are far more expensive than the taxes paid (pre-kid). I wouldn't exactly be jealous.

[jIM_Ohio]

Originally Posted by MonkeyMama

4.2% Fed & 0.7% State (Taxes divided by AGI).

However, my software calculates effective tax rate as taxes divided by "taxable income." This seems to be the proper definition.

For that I show 8.1% & 1.2% (Fed, State)

Since we have kids we have paid little in incomes taxes. This was our biggest year since kids. That being said, kids are far more expensive than the taxes paid (pre-kid). I wouldn't exactly be jealous.

I don't have final numbers, but from what I remember, about 47% of our gross is not taxed at all (because of deductions).

Tax rate can be many things:
tax liability (before credits)/taxable income
tax liability (after credits)/taxable income
tax liability/gross income

I am beginning to think we need to measure
taxable income/gross income=% of income taxed
as part of the discussion as well.

[Broken Arrow]

Real quickly, TurboTax said 6.8% on mine.

[noppenbd]

$124K gross income
$96K AGI
$65.7K taxable

Federal taxes were $8100 (12.4% of taxable, 9.5% of AGI, and 6.5% of gross).

Taxable/gross income=53% of my income was subject to federal tax!

[JinCO]

I'm at about 17.5%

[Russell]

Taxable income: $137k
Effective tax rate: 15.6% federal and 9.3% state

TurboTax compares you to others in the same income range and we had the fewest deductions. Looks like a lot of people:

1. Donate a lot of money to charity $4k vs our $600
2. They have a lot of business expense almost $30k! we have no business
3. They have some business loss -$7k
4. They have "non-taxable interest" what the heck is this?? about $4k worth - we have 0
5. and other stuff

So apparently we're paying a lot in taxes, the only deductions&credits we have are our mortgage interest, daycare expense and $293 worth of child credit for our DD.

[sweeps]

Originally Posted by Russell

They have "non-taxable interest" what the heck is this??

Municipal bonds pay non-taxable interest.

[creditcardfree]

3.3% (tax/adjusted gross income)
6.4% (tax/taxable income)

Looks like 51% of our AGI, was taxable. However, if I use our gross income for 2008, the taxable portion was 38.75%. Not too bad.

[Uneventoast]

9.8% federal

However, I calculated in my head that I paid almost over $15K in federal, state, local, and property taxes last year and that doesn't include the 6.5% sales tax that I pay for purchases, my guess I paid over $16K in taxes last year

[LivingAlmostLarge]

I haven't even started. I am feeling terrible looking at everyone whose done. I think I owe anyway.

[jIM_Ohio]

My summary:
AGI 105k
taxable 61
% taxable 58%
Total tax $6344
effective tax rate (tax/AGI) 6.04%

[noppenbd]

I think the most meaningful number is the percentage of gross. Percent of AGI is not that meaningful. For instance, someone could have significantly different AGI just by putting 10K in traditional IRA (5K per spouse), versus putting the same 10K in 401k. To me this is not a meaningful distinction, but it would have a big influence on effective tax rate using AGI.

EDIT: My mistake, AGI is after IRA contributions, so the AGI number is meaningful.

[jIM_Ohio]

The traditional IRA would reduce AGI- as that is before AGI is calculated on the tax return.

[MonkeyMama]

For me, AGI = gross income. So I guess why I find it an interesting measure, personally. But a good point, of course. AGI tells you nothing of gross income in general.

Even so only about 45% of my income is taxed. Plenty of deductions after AGI.

[jIM_Ohio]

Originally Posted by MonkeyMama

For me, AGI = gross income. So I guess why I find it an interesting measure, personally. But a good point, of course. AGI tells you nothing of gross income in general.

Even so only about 45% of my income is taxed. Plenty of deductions after AGI.

45% is quite impressive- any time less than 50% of income is taxed, that is a great tax plan.

[MonkeyMama]

Or maybe I just live in an expensive area with big mortgage and high state taxes. & we fund our own health insurance. I don't think it's all that great. LOL. I don't keep our mortgage or fund our health insurance for the tax break - for sure!

I am sure a lot of our relatives in San Francisco pay on less than 45%. But they have absurd mortgages.