Question about lifetime planner expenses vs income tax

Randy2706
Randy2706 Quicken Windows Subscription Member
in Budgeting and Planning Tools (Windows)

My question involves the lifetime planner. I think this is probably a basic question, but I can't seem to find an answer.

When completing information for the lifetime planner, your are asked what tax bracket to use. You are later asked to say what all of your expenses are.

When you choose your tax bracket, do those expenses automatically get factored in the lifetime plan or do you have to add the income tax expenses again in expenses?

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Answers

  • Scooterlam
    Scooterlam Quicken Windows Subscription SuperUser ✭✭✭✭
    Answer ✓

    Lifetime Planner calculates your tax expense based on the average tax rate you specify. They are added by the Planner and are applied to taxable income. So, no need to include those tax expenses in your living expense or special expense assumptions. Note that this tax rate assumption is not the same as your IRS tax bracket.

    Here is a link to various LTP help topics.

    https://info.quicken.com/win/enter-information-about-living-expenses-lifetime-p

    https://info.quicken.com/win/enter-information-about-taxes-lifetime-planner

  • Randy2706
    Randy2706 Quicken Windows Subscription Member

    I am wondering why there is an option to add taxes to your expenses when you calculate expenses in the lifetime planner based on categories. I understand that some people may have a weekly/quarterly tax stimated tax payment, but if you pout that in expenses and if it is also automatically calculated in the tax assumption?

  • Scooterlam
    Scooterlam Quicken Windows Subscription SuperUser ✭✭✭✭
    edited May 27

    If you use Category Detail method to estimate future living expenses in LTP, then you have the option of excluding income tax related categories (in Category Detail) to avoid double dipping.

    I suppose that there may be other tax situations, other than tax on income that a user wants to include in the Category Detail expense calculation. Quicken LTP has made a simple rule regarding income tax handling, leaving the user open to include taxes expenses other than those calculated via the tax rate assumption x income that is specified in LTP as taxable.

    I'm not a fan and have never used Category Detail to estimate future living expenses. Instead, I use the budget tool to build what I believe would be a reasonable future category expense estimates, less income taxes (which is accounted for in LTP via the tax rate assumption. In fact, I have a few of these budget plans based upon different, future relocation scenarios.

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