Income from traditional retirement sources, such as Social Security, pensions, annuities, tax-deferred accounts and Roth IRAs, is subject to different tax rates, depending on the source. Some of these income sources are taxed as ordinary income, while others are subject to lower tax rates or are tax-free.Know More
Taxes applied to retirement income derived from Social Security income is dependent on the individual's filing status and provisional income, which is his adjusted gross income along with 50 percent of his benefits and any tax-free interest procured during the tax year.
Funds withdrawn from tax-deferred accounts, such as a 401k or traditional IRA, are taxed as ordinary income. Payments received from government and private pensions are also taxed as ordinary income, assuming the plans were free of after-tax contributions. However, withdrawals from a Roth IRA are tax-free if the policy is held for at least five years and the holder is at least 59 1/2 years of age. If these requirements are not satisfied, withdrawals are subject to not only taxes but a 10 percent penalty.
Profits derived from the sale of taxable assets, such as real estate, stocks, bonds and mutual funds, are subject to the capital gains tax. The precise rate is dependent on how long the securities are held. Short-term capital gains are applied to assets prior to being held for one year and are taxed as ordinary income, whereas assets held for longer than one year are taxed at a rate of 0 to 15 percent depending on the holder's tax bracket. Income derived from annuities is taxed beyond the principal amount, which is tax-free.Learn more about Taxes
Bonuses are taxed at high rates because the money raises your tax bracket and is taxed at the higher rate during that pay period. Alternatively, the Internal Revenue Service allows your employer to withhold a flat rate on the bonus for taxes.Full Answer >
Information on the tax rate for a 401(k) withdrawal made during retirement can be found on the website of U.S. News and World Report under the site Money section. The tax rate depends upon the holder's tax bracket rate at the time of withdrawal from the account.Full Answer >
IRS Form 1099-R is a tax form issued when money is withdrawn from a qualified retirement plan such as a pension, annuity, IRA or profit-sharing plan. The reported withdrawal amount is included as taxable income unless the money is rolled over to another qualified retirement plan.Full Answer >
TurboTax reports that independent contractors can deduct half of the self-employment tax, health insurance premiums, office expenses, retirement plan contributions and business travel expenses. Independent contractors can also deduct the mileage accumulated on a personal vehicle when driving for business-related purposes. About.com notes that business equipment, employee benefits and wages, advertising costs, professional dues, professional services and repair costs can also be tax deductions for independent contractors.Full Answer >