Putting it all together
In 2019, a married couple who are both 65 or older and claim the standard deduction can have up to $104,450 of capital gains and pay no federal income taxes. But once Social Security and IRA distributions are included in the mix, the tax picture changes dramatically, Mr. Elsasser said.
In their 12% federal tax bracket, every additional $1,000 withdrawn from an IRA would subject not only $120 of the IRA distribution to income taxes but cause $850 of Social Security benefits to be taxed and push $1,850 of investment gains into the 15% capital gains bracket, for an additional combined tax of $499.50. That works out to an effective tax rate of nearly 50% on a $1,000 IRA withdrawal, Mr. Elsasser said.
