Tax planner incorrect income tax calculation

epicmountain

I've use the tax planner regularly and compare results to a spreadsheet I keep. My MFJ taxable income for 2024 is estimated at $249531. Quicken's planner says the income tax should be $42826. However, when I run the marginal calculation of the estimated income using Excel, I get a tax of $45972.

I'm not sure why that number is so far off now. When I ran this mid-year Quicken, my spreadsheet numbers were equal. I tend to believe the spreadsheet and wondering if it's just a bug in Quicken.

Quicken Classic Business & Personal, R59.35, Win 11

Excel calcs below

Quicken result

markus1957

Capital gains? Qualified dividends?

epicmountain

Yes, both. But that is before the taxable income number is calculated.

markus1957

Quicken, behind the scene, separates LTCG & QDI into a different bucket for calculation of tax owed. The sum of LTCG/QDI and regular income minus the allowed deduction (standard/itemized) is displayed as taxable income.

Quicken calculates taxed owed for regular income (excludes LTCG/QDI) minus the deduction using the rates you showed and then adds LTCG/QDI times the appropriate tax rate (0/15/20%) for that bucket. That is why you see the difference. Your spreadsheet does not accommodate the different tax rates used for LTCG/QDI.

epicmountain

Ah ok. Lemme check my excel sheet calcs and see if they match. I thought I was figuring that in particular income with some different calcs in my spreadsheet

Thanks for the clarification

volvogirl

It depends on what kind of income you have.  There are like 7 different ways to figure the tax. See the IRS worksheet on 1040 page 36 for how the tax is figured. If you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet. That includes the tax on your regular income too.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Jim_Harman

[edited] Also if you have Social Security income, it is taxed at a lower rate than regular income. the full amount of your income is not taxed.

In the Tax Planner, the number to enter on the Taxable Social Security benefits line is the taxable portion of your full SS income, probably 85% of the full income for you. The Tax Planner applied the 85% behind the scenes for a while earlier this year, then they changed it back so that now you enter the taxable portion of your SS income, as in earlier versions.

volvogirl

Social Security is not taxed at a different rate but only up to 85% can be taxable depending on your other income. But at a high income just figure 85% is taxable.

Up to 85% of Social Security becomes taxable when all your other income plus 1/2 your social security, reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

Jim_Harman

Thanks for clarifying, @volvogirl. I edited my post above.

epicmountain

OK, issue found. It was the chair-to-keyboard interface section of the planner.

A qualified dividend is not qualified business income. The latter I have, the former I do not. I also don't have any appreciable LTCGs either, less than $10, so those get lost in the mix.

Once I corrected the entries, the Excel and the planner matched.

Thanks

Jim_Harman

Thanks for the update, @epicmountain!