Downloadable Excel Spreadsheet
The spreadsheet attached to this website is designed to give you a picture of your personal
Tax Hump. It consists of four tabs:
- The [Marginal] tab accepts your personal tax related input and calculates your taxes with
and without including your optional “What If” data. We will discuss this tab in great
- The [Brackets] tab captures the Married TRUE/FALSE information from the Marginal
tab, then copies the appropriate tax bracket information from the bottom of the page
to the top where it will then be used for all of the tax calculations.
- The [Graph] tab uses 1,000 data points to create a graph of your personal Tax Hump.
- The [Graph2] tab creates a parallel personal Tax Hump including your What If data.
Before I give you the link to my Parallel Taxes Excel Spreadsheet, read the following
instructions so you can properly save it to your hard drive.
Your browser does not properly emulate Excel, so the graph that is displayed on the google
drive page will probably have a few extra strange lines in it. Just ignore the extra lines
for now and do the following after you follow the link!
Hit the down arrow in the upper right corner of the page to download the
file to your computer.
Then open the file with Excel, if you have it:
It will open read only, so hit the [Enable Editing] button before you save
the file to your disk.
OK, here is the link to download the spreadsheet, ParallelTaxes.xlsx, from my google drive.
As I understand it, everything on google drive is auto scanned for viruses, but use it at
your own risk!
This is what you get!
You enter your personal information in the yellow
frames at the top left of the Marginal tab.
The Extra Income frames below your input will
detect the increase in your taxes from the Tax Calculator, compare it to the amount
of extra income you are looking at in the What If column and calculate your Federal
Marginal Tax Rate and your total marginal rate including your personal state and local
The To LTCG and To Hump let you know how much
additional income you can afford before entering your personal tax hump. This
information is supplied for both your now and What If situations. Red numbers are
negative and let you know how far your income is into the hump, how much you have to
cut back to avoid the hump!
You are also given the information on how much of
your Tax Delayed Social Security has been taxed and how much is still tax free
It is important to note that the To Hump and To LTCG numbers represent the available
increase in "Taxable Income". Just remember that while you are in the 85% taxability
bracket for your Social Security Benefits, each additional dollar of actual income
increases your taxable income by $1.85. The amount of additional income / IRA or 401k
withdrawals is the second number in each case, the at 85% number!
A picture is worth a thousand words!
But in this case it could be worth thousands of dollars!
The extra income frames indicated that the extra $5,000 would cost $2,130 in extra
Federal taxes. If this extra cash had been withdrawn or converted before retirement
at the 22% Federal tax bracket, the Federal tax would have only been $1,100, a $1,030
savings if you were aware of the future interaction of your desired standard of living
and your personal tax hump.
Your Tax Hump did not change in this example because the What If data
only included $5,000 of extra taxable income, so the solid purple marginal bracket
line is directly over the solid red line. The dotted red line illustrates your Federal
Tax Brackets while the dotted green line illustrates the 50% and 85% parallel taxation
of your Social Security benefits for the combined Spouse and You data.
The important data is represented by the tic marks. The solid green tick mark illustrates
the gross income data that you entered in the Spouse and You columns. Note its relationship
to the solid red marginal tax line, you are very close to you personal Tax Hump.
Also note the distance between the solid green gross income tick and the solid blue
After Fed Tax tick.
What If your situation at the end of the tax year was a little
You enjoyed a comfortable year on a $59,000 gross
income, paying only $2,738 in Federal taxes.
Looking at your solid green tick mark,
and the To LTCG (at 85%) data, you can take additional taxable income out of your IRA
at the 22.2% marginal tax rate this year which could help you to avoid the 40.7%
marginal tax hump next year!
The spreadsheet says that you can take about $5,500
out of your IRA, but you decide to play it safe and take out only $5,000 and the
spreadsheet indicates that you will only pay 22.2% in Federal taxes.
If you take the extra $5,000 out of your IRA in December, you could take that much less
out in January! Next year, if all goes as normal, you would be able to do the same for
an extra $10,000, or, if an unexpected expense happened during that year, you could
have covered it without paying any of your huge Hump Taxes!
As with everything else on this website, verify your estimated taxes with and without
the extra income from other sources.