In the current thread discussing Bill W's adoption credit, a number of people are saying that he (and I) are incorrect to call his current situation a total 67% marginal rate.
In an article I wrote some time ago, titled "Social Insecurity" at
For her, I concluded there was an effective rate of as much as 46.25% on her withdrawals as she passed into the range where the social security became taxable.
My question - I've referred to this 46% bracket as a "phantom tax bracket". If that phrase is incorrect, what is it called? I'll accept that the term "marginal tax bracket" may be the 10/15/25/28 brackets as referenced by the tax charts we're all used to seeing. But when I sit with turbo tax and my senior clients, what words do I use to describe the fact that for them, the next $1000 is taxed at something greater than those 'neat' few marginal rates?
Finally, what makes Bill's situation any different from the above, aside from the fact that his seems to be pretty unmanageable? Had he been older, 59-1/2+, we'd be answering him a bit differently, no? Bill - just don't take that huge IRA distribution this year, reduce it to stay under where the credit phaseout starts..... and he'd take $40K less out.
As always, if I am misusing a term, I'm always seeking to be set straight. Thanks, Joe
-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.