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My husband and I both will begin drawing an amount from our

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IRAs by the end of...
My husband and I both will begin drawing an amount from our IRAs by the end of the year and it will be taxable. We are both retired and have been living on SS and My WA State Retirement and His Navy Retirement. When we begin getting an amount from our IRAs, where is it added to the income we are already getting? I'm trying to figure out how much tax should be withheld in order not to have to pay taxes at the end of the year. Can you give me some advice or some place I can look the information up? Thank you. Mitzi Mielke
Submitted: 7 years ago.Category: Tax
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Answered in 12 minutes by:
7/2/2010
Tax Professional: Merlo, Accountant replied 7 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hello Mitzi,

 

When you start withdrawing from your IRA, the amount you withdraw each year is simply added to the rest of your income, and you would be taxed at according to the tax bracket that puts you in.

 

I could help you estimate the taxes you would owe but need more information.

 

What is your total income for the year? Please break down the sources of the income.

 

What state do you live in?

 

 

 

 

 

 

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Customer reply replied 7 years ago

 

Washington State

 

Int. Earned 932.00

SS $12460.80---- taxable amt of both SS ----is $7844.00

Mil Ret. 20796.00----

Wa State 10299.72

Total taxable income for 2009 was $39,872

and should be about the same in 2010

Tax Professional: Merlo, Accountant replied 7 years ago

Hello again Mitzi,

 

Thank you for the additional information.

 

If you are filing as married filing a joint return, the taxable income you report that is between $16,750 and $68,000 would be taxed at a rate of 15% for federal tax purposes. Luckily you live in WA which has no state income taxes, so federal tax is all you need to worry about.

 

What you also need to keep in mind is that the more you take out of your IRA account, the more of your SS benefits will be subject to tax.

 

Based on estimated interest income of $932, Military retirement of $20,796 and WA state retirement of $10,299, that gives you total income of $32,028 without your SS benefits. You may have up to $25,770 in other income before part of your SS is also taxable and you already exceed that amount by $6,258 with the income you have from other sources. So when you start adding your IRA withdrawals to your other income for the year, that will make the taxable portion of your SS benefits also increase.

 

The maximum amount of your SS benefits which can be subject to tax is 85%, so the most you would be taxed on of those benefits is $10,591. If you were already paying tax on $7,844 of those benefits, then you could easily hit the $10,591 mark by adding IRA withdrawals to your income. So you should plan on putting another 15% aside to cover the additional $2,747 of SS benefits that might be subject to tax.

 

If this was helpful please press the Accept button. It is the only way we receive any credit for helping with these questions.

 

Thank you Mitzi

 

 

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