Tax brackets and taxable retirement accounts

[elselko]

I want to take distributions from my investment account (not Roth IRA),  and want to determine the maximum I can take without getting bumped into the next tax bracket.  I am in the 12% bracket based on my income, which is a combination of social security income and a pension.

What figure on my tax return do I use?   Is it my adjusted gross income, or my taxable income?

[SusanC6]

Federal Tax brackets are based on filing status.  2023 tax brackets are reflected in the following link, with an explanation of how taxable income is taxed at varying percentages.  

https://www.irs.gov/filing/federal-income-tax-rates-and-brackets  

The 2023 rates have been adjusted for inflation and can be seen by following the link in the above article.

When taking distributions from your investment account, you will have either have a short term or long term capital gain based on how long you have held the investment that you sell.  Short term capital gains will be taxed as ordinary income under the above rates.  Long term capital gains will be taxed at 0%, 15% or 20%, depending on your taxable income and filing status.  The IRS link below provides the taxable income amounts and capital gain tax rate % based on your filing status.

https://www.irs.gov/taxtopics/tc409

When drawing from your investment account you will need to know the gain or loss on the investment your are selling vs the amount of distribution you are receiving to determine the tax impact.

Taxable income is the amount to consider when looking at the above tax tables.

[BettieG]

In order to determine your tax bracket for a given tax year, you would use your Taxable Income amount, taking into consideration your filing status (e.g., Single, Married Filing Jointly, etc.).  This article includes information about how to apply the tax brackets and what they will be for Tax Year 2024:  What is My Tax Bracket?

I hope that helps!

[marvin2it]

Taxable income, not adjusted gross income, is the relevant amount for determining the upper limit of a tax bracket.  Therefore, you will need to start with an estimate your adjusted gross income and then subtract the greater of your estimated itemized deductions or the standard deduction for your filing status.  Adjusted gross income less the greater of itemized deductions or the standard deduction equals taxable income.