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Published byBuddy Wilkerson Modified over 9 years ago
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Taxes
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Income taxes n Tax basics Effective and marginal tax rates n What is taxable? Pensions and annuities Other income Home sale gains n Paying taxes in retirement Withholding Estimated taxes n State taxes
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Effective tax rate =Tax Taxable income Marginal tax rate = Rate applied to your last taxable dollar Useful for figuring after-tax return Basic concepts
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See IRS Publication 575 - Pension and Annuity Income What is taxable? n Your City pension n Deferred Compensation Plan distributions n Social Security n Home sale gains
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Your City pension n Partially tax-free as return of your after-tax contributions n After recovery of after-tax contributions, pension is fully taxable
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Deferred Compensation Plan n All distributions fully taxable in year received n No early-withdrawal penalties n Can be rolled over into an IRA n Three-year catch-up provision available within three years of retirement eligibility n Age-based catch-up available to employees 50 years of age
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Rules on IRAs n 10% federal penalty on withdrawals before age 59-1/2 n 2.5% California penalty n Must start withdrawing from an IRA by April 1 of year following age 70-1/2 according to formula n 50% penalty on underwithdrawals in year following age 70-1/2 or later
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Social Security n Up to 85% may be taxable if income exceeds certain level
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Home sale gains Exclusion available for capital gain n Conditions Owned home two of last five years o Lived in home two of last five years o Have not used the exclusion in two-year period ending on sale date n Amount Single: $250,000 Married: $500,000 (if both meet the “lived-in-it” and “have-not-used” requirements; otherwise $250,000)
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Paying your tax n Timely payment required n Penalty for late payment n Withholding
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* Other percentages may apply to certain high-income taxpayers Paying your tax n Estimated tax payments n No penalty if: Less than $1,000 owed at filing time 100% of previous year's tax amount paid* 90% of current year's tax paid
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State taxes n State income tax treatment of retirement income varies n Consult a local state tax expert n California income taxes
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Click link below to continue... LAFP4 FINPLN2006 2006 0818.ppt
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