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What is my real Tax rate?

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  • What is my real Tax rate?

    Just curious what is my real Tax rate for 2015?

    Here are the details:

    Marginal tax bracket for 2015: 33%

    After deductions tax rate drops to 31%

    But the income for both does not include my 401K contributions + money I got for CME + FLEX money. If I include all these three things, my income increases and tax rate drops to 28%

    But this is not the end, I got lucky last year and got gifts from mother in law, so should I count the gifts from MIL as income? If I include that in my income and they were below taxable level then my tax bracket drops down to 25%

    So when WCI puts his poll up for taxes what should I put my number as  for actual tax rate?

    31%, 28% or 25% ?

    Just curious.

  • #2
    Gifts are not generally considered income - unless you want them to be. As in many areas of taxation, your "real" tax rate is subjective. Therefore, imo, the poll WCI put up is of little value because there are so many personal definitions in use. For the poll to be useful, WCI should state the formula that voters should use to compute the rate they are voting on.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      Not sure what "real" refers to. The two tax rates that most people discuss are marginal and effective. Marginal is easily determined using tax software. Add $100 of SE income to your income and see how much of it goes to taxes. That's your marginal rate.

      The easy way to get your effective tax rate is to take your total income (1040 line 22) and divide it by total tax (1040 line 63.) Personally, I think you ought to add back in losses like from tax loss harvesting to your total income, and if you have W-2 income, you should probably add back in the portion of payroll taxes your employer covered both to the tax total, but those are pretty minor points.

      I don't think most people include benefits like CME money. I don't include legitimate business expenses as a self-employed doc so I don't know why you would do so as an employee.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011