Taxing in the US

[JohnT]

Originally posted by HershOstropoler
Just very roughly.

Adjusted Gross Income (AGI)
SS - $6,120
Dividends - $20,000
Pension - $18,000
Total: $44,120

Itemized Deductions
Health care: $22,000

OK, if the woman has the Worlds Dumbest Accountant and takes the standard 65+ single deduction (I'm assuming she's widowed) of $5,850.00 and the 1 exemption of $3,000, she is liable for $5,870.00 in tax.

Otoh, if she itemizes her expenses (and I'm just counting medical expenses) she will have a tax burden no greater than $3,000.00 and more likely around $2,500.

If she worked with the Worlds Dumbest Accountant in a world with no dividend tax, her bill would be $1,991.00

If she itemized her expenses in a no dividend-tax world, her tax bill would be around $22.00.

The kicker is the $22,000 of medical expenses - these expenses are deductable from your adjusted gross income for the portion that exceed 7.5% of the AGI. In my example, 7.5% of her AGI is $3,309 meaning that $18,691 of her $22,000 in medical expenses were deductable from her AGI to determine taxable income, effectively reducing her tax bill by $2,501.00.

[JohnT]

Originally posted by Kidicious


Hmmm.. Seeing how the elderly will be getting the lion share of the transfer payments and govt services in the near future I support the dividend tax even more. Thanx JohnT. I hadn't thought of that.

Do not forget that, in theory, SS payments will be no more than the money that she and her husband has paid in... so you can't count those.

On the other hand, I showed that eliminating the dividend tax will save around $3,000 a year in taxes for the woman in my example.... with savings like that, she won't need so many transfer payments.

[DanS]

not because I'm a wealthy nob

Shouldn't that be "not only because I'm a wealthy nob"?

Those medical expenses are definitely crushing. That $22,000 is just from drug costs, right?

[Kidlicious]

Originally posted by JohnT
Do not forget that, in theory, SS payments will be no more than the money that she and her husband has paid in... so you can't count those.

Yes, in theory, because the designers didn't count on the different sizes of generations, but not in reality.

Originally posted by JohnT
On the other hand, I showed that eliminating the dividend tax will save around $3,000 a year in taxes for the woman in my example.... with savings like that, she won't need so many transfer payments.

She won't need them, but they certainly will be nice for her