- May 2, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Understanding Taxation on Retirement Income
Apologies for the seemingly obvious question, but all my search results on the subject involved calculating this along with mixing in social security and pretax asset withdrawals, etc. I’m only interested in the simple scenario where I’m retiring at 53 years old and just want to use my taxable brokerage accounts to live off of for a few years.
In a hypothetical scenario, if I retired at the beginning of 2024 and my only source of income was selling long-term (held over a year) assets in a regular brokerage account, how does the tax calculation work? Let’s say I sold $70,000 in assets (such as VTI) and $50,000 of that were gains. This $50,000 would be the thing considered “income?”
Using 2024’s Federal standard deduction as a single filer at $14,600, does that mean my taxable income is $35,400 ($50,000 – $14,600)? And since this falls in the 0% capital gains bracket (below the $47,025 threshold where the 15% bracket starts), I pay nothing in tax at the Federal level?
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I’m also a California resident so I know there’s a separate chain of calculations for the state, which I think amounts to $1,441 (per SmartAsset’s calculator).
Did I get this right or am I missing something? For the sake of simplicity in this example I’m ignoring any dividend or interest activity from portfolio assets.
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>Using 2024’s Federal standard deduction as a single filer at $14,600, does that mean my taxable income is $35,400 ($50,000 – $14,600)? And since this falls in the 0% capital gains bracket (below the $47,025 threshold where the 15% bracket starts), I pay nothing in tax at the Federal level?
The calculation is correct. But youll need to add in any taxable social security payments and Traditional 401k disbursements if you have any.
>I’m also a California resident so I know there’s a separate chain of calculations for the state, which I think amounts to $1,441 (per SmartAsset’s calculator).
I’m not sure about California, which seems to also have some of the most complicated and willingness to reach out to tax you on things nowhere else does.
Please look at Page 37 in Form 1040 instructions at the Qualified Dividends and Capital Gain Tax Worksheet when you add more income streams such as dividends, interest, distributions, capital gains distributions, etc. When I complete that worksheet, my federal tax is always lower.
$50,000 capital gains
minus standard deduction = TAXABLE INCOME
Your taxable income is $35,400 which is below the $47,025, so your FEDERAL capital gains tax is $0.
I agree with your assessment and give you bonus points for looking at 2024 tax information
[https://www.irs.gov/taxtopics/tc409](https://www.irs.gov/taxtopics/tc409)
That IRS link is for 2023 discussion on capital gains
When I was offered a job in California I asked for a very high salary, and the company refused. I know nothing of California taxes.