Because a Roth conversion (or a future traditional IRA distribution) happens at the margin — on top of whatever income and deductions the clients already have — it's crucial to
look at the marginal tax rate, now and what's likely in the future.
Another wrinkle to the 401 (k) / Roth IRA debate is to
look at your marginal tax rate.
Then
look at a Marginal Tax Rate Grid for BC & Federal Taxes.
Not exact matches
Having said that, the capital gain
rates are pretty low, so we're historically, when you
look at capital gain
rates — Jackie could probably talk to this even more historically — but if you're not in the top
marginal tax bracket, your federal
rate is 15 %.
This is great for those who are
looking to invest long term because the interest paid from peer to peer loans are usually
taxed at your highest
marginal tax rate if it isn't
tax sheltered.
It means
looking at the complete
tax system (the
rate structure, the child care expense deduction, the working income supplement, the child
tax benefit, among others) and how it penalizes low - and middle - income families with high punitive
marginal tax rates.
Now let's take a
look at the amount of Canada Child Benefit receivable and resulting
marginal tax rates at higher income levels.
Start now by
looking at your current
tax situation, making a plan to increase your passive income streams and determining your
marginal tax rate.
Looking at the
tax table, you can also see that you can earn an additional $ 52,500 in income before increasing your
marginal tax rate to 28 % ($ 91,150 less $ 38,650).
The Federal Income
Tax brackets and marginal tax rates for 2012 are out, and we'll take a look at how the changes affect single taxpayers, those who are married filing jointly, those married filing separately, and head of househo
Tax brackets and
marginal tax rates for 2012 are out, and we'll take a look at how the changes affect single taxpayers, those who are married filing jointly, those married filing separately, and head of househo
tax rates for 2012 are out, and we'll take a
look at how the changes affect single taxpayers, those who are married filing jointly, those married filing separately, and head of household.
Let's
look at the value of a mortgage (interest deduction + real estate
tax) for various mortgage balances, interest
rates, and
marginal tax rates.
Go and
look at your
tax return,
look at the total income line and
look at the total you had to pay both in federal and provincial
tax, that's your total
tax rate, that's not your
marginal tax rate, which is the
tax on the last dollar you owe, or sorry, earn.
So
looking at the chart below, a single filer with $ 85,000 in income would pay
taxes at the 10 %
rate on the first $ 9,525, pay 12 % on the income from $ 9,526 to $ 38,700, pay 22 % on additional income up to $ 82,500, and have a
marginal tax rate of 24 %.
Looking at the tables above you can see that if you make the same pre - and after -
tax contributions to a TFSA and RRSP, there is no difference if your
marginal tax rate stays the same.
Even if you're paying a lot of
taxes now, you're talking
marginal dollars when you
look at current contribution, and average
tax rate when making withdrawals.
Or another way to
look at it is that any profits from a stock sale in a non-reg account are
taxed at HALF your
marginal rate.
Of course, if you assume a lower
marginal tax rate in retirement, then things would
look very different and it would be advantageous to convert / withdraw the money
at your lower
tax rate.
Your mediator will help you and your husband
look at this area in - depth, and will prepare a
tax analysis as the
tax issues become significant
at your husband's
marginal tax rate.