How does government look at our money?

How The Money Is Taxed?

On this front, it is important to realize that the federal (and some states) government looks at our money in a certain way- in terms of how the money is taxed. In other words, from the government’s perspective, the average American can have money (more property “assets”) in three different types of accounts, or “buckets”. For the money that is taxed every year, we use the name “the taxable bucket” and these holdings can include CDs/bonds, stock dividends, stock sales, rental income, real estate sales, mutual fund sales, savings bond redemptions, bank account interest and anything else that generates a tax form every year.

The second “bucket” includes all of the types of accounts in the middle bucket below. The third bucket-the tax-free bucket, unfortunately, has a much smaller list of possible holdings.

If the government looks at our money this way, so should we!

Financial Plannig

ROTH CONVERSION STUDY

Financial Planning

A History of Tax Rates

The impact of taxes in retirement

Many retirees underestimate the role taxes will play. In addition, given the country’s rapidly aging population and terribly high debt levels, it is increasingly likely that tax rates will go up, possibly significantly, in the coming years.

The IRS and the graduated income tax both came into existence in late 1913. Here is a look at the history of the highest marginal tax rates since then. Note that the high was an incredible 94% in 1944 and 1945 and that it was 70% as recently as the 1970s.

A look at today’s tax rates-attractive from a historical standpoint but expiring in less than 5 years on 12/31/25.

 

2017 Income Tax Rates and Brackets
Financial Planning
2021 Income Tax Rates and Brackets

The 2017 tax act changed the tax rates and income ranges to which the rates apply.

2021 Standard Deductions
Financial Planning