Real Marginal Rate Calculator: the facts

1. The bracket is not the rate. Once provisional income passes $25,000 single or $32,000 joint, each extra dollar of other income also pulls 50 cents of Social Security into taxable income; past $34,000 and $44,000, 85 cents. The dollar is taxed at the bracket rate 1.85 times.
2. Example: a single retiree, 65 or older, with $30,000 of Social Security and $40,000 of other income sits in the 12% bracket, but the next $1,000 of IRA withdrawal costs $222: a real rate of 22.2%.
3. A couple with $48,000 of benefits and $60,000 of other income: bracket 12%, real rate 21.6% on the next $1,000.
4. The effect ends when 85 percent of the benefit is in income, which is why the real rate falls back to the bracket rate at higher incomes; the peak sits where the 85-percent phase-in meets the 22 percent bracket.
5. Two more slopes hide in the same range: the senior deduction of $6,000 per person falls by 6 percent of income over $75,000 single and $150,000 joint, adding 6 percent of the bracket rate; and the Medicare tiers are cliffs, where one dollar can cost a full year's surcharge two years later.
6. The practical use is sizing: a withdrawal or a Roth conversion is measured against the real rate on the dollars it adds, not the bracket printed on the return, and the shape of the curve says where to stop.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.