This is Holistiplan’s version of the Easy Button, where a simple click will tell you how much more ordinary income or capital gains income you can realize before moving into a higher effective tax rate.
The system starts with the scenario in question as a baseline, then iteratively adds $500 and calculates the resulting tax to find at which point the effective tax rate moves higher than the baseline scenario. Remember, we’re looking for the change in the effective tax rate, not just when you move from one marginal bracket to the next. Effective rates could change because of credits or deductions phasing in or out, even though the marginal bracket hasn’t changed.
For taxpayers 65 and over, we will also show how much income a client could recognize before moving into the next level of the Medicare surcharge for Parts B and D. Once you have this number, you can create a new scenario and add the additional income, such as with a Roth conversion, the result of exercising options, realized capital gains, or any number of additional items.