I am thinking of withdrawing from my Rollover IRA until I reach my social security full retirement age.
Will the tax rate on my IRA withdrawals be affected because my spouse is working and we are filing a joint return?
Similarly, when I start my social security withdrawal will the amount of taxes on the social security be affected because my spouse is working and we are filing a joint return?
Maybe, and maybe.
If the withdrawal from the retirement account puts you in a higher tax bracket, then you will pay a higher tax rate. Overall though, it's still going to be significantly lower with the new tax rates that took force in 2018.
For the SS withdrawal, married couples with combined income of less than $32,000 don't pay taxes on their Social Security benefits. Over $32K and it's s sliding scale that if high enough, will tax a maximum of 85% of your SS income. Now this could change (or may have already for all I know) and you can get the most current information on the AARP website at http://www.aarp.org
Thank you for the explanation.
So if my retirement income is combined with my wife's income on a joint return I will likely pay more taxes on my IRA withdrawals. I now wonder if filing as married filing separately is an option; though I'm not sure how our mortgage interest and the like will come into play.
When it comes time for the SS withdrawal, our combined income will be more than $32,000. So similarly will filing as married filing separately be of any benefit?
When a married couple files separate returns, you automatically lose a vast majority of deductions and credits that you would otherwise qualify for filing joint. That means that together your tax liability if you file separate returns will undoubtedly be higher. So I doubt that would be at all beneficial for you to file separate returns.
One thing to keep in mind when filing separate returns, if that if one spouse itemizes deductions, then the other spouse *must* itemize, even if the itemized deductions are ZERO! Likewise if one spouse takes the standard deduction, then both *must* take the standard deduction even if the itemized deductions of one spouse would exceed the standard deduction.