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Expenses ... after taxes??
Posted: Wed Apr 17, 2019 5:39 pm
by albireo13
I am just getting started using FRP. I have been using FireCalc up until now.
My question is regarding expense inputs. Are they after tax expenses??
In FireCalc all expenses are before taxes (Gross expenses).
Thx
Re: Expenses ... after taxes??
Posted: Wed Apr 17, 2019 6:44 pm
by jimr
Most people enter tax rates into the planner and let the planner calculate taxes, which means you'd enter your expenses without adding in the taxes you expect to pay. If you'd prefer, you can zero out the tax rates and manually add taxes into your expenses.
For tax rates, the planner's main input page has a field for an "income tax rate" and this is the average tax rate charged on taxable pensions, taxable social security, ira withdrawals and other income amounts. There's a separate "investment tax rate" which is the rate automatically charged on taxable portfolio gains. The planner carries the taxable portfolio at a 100% basis and taxes each year's gains at the income tax rate. Taxable withdrawals from the taxable portfolio don't have any taxes deducted (due to the 100% basis assumption). Also, don't forget to account for any state or local income taxes when you set the income and investment tax rates.
If you have any questions, please feel free to follow up.
Jim