Taxes

How SmartRetireCalc estimates federal income tax in retirement — the progressive bracket model, deductions, and how bracket edges and deductions are projected for future calendar-anchored years.

Progressive bracket model

Federal income taxes are estimated using a progressive bracket model. Each dollar of taxable income is taxed at the marginal rate of the bracket it falls into — not a single flat rate applied to the whole amount.

Taxable income in retirement typically includes:

• Withdrawals from pre-tax accounts (401k, Traditional IRA), including any forced Required Minimum Distribution.
• The gain portion of Non-Deductible Traditional IRA withdrawals.
• A portion of Social Security benefits (up to 85% depending on provisional income).
• Roth conversion amounts (if using a conversion strategy).

Roth withdrawals and principal withdrawals from taxable brokerage accounts are not included in taxable income (capital gains treatment for taxable accounts is simplified in the current model). State income taxes are not modeled.

Deductions

Taxable income is reduced by:

• The standard deduction.
• The age-65 additional standard deduction (IRC §63(f)) — $2,050 for a single filer, $1,650 per qualifying spouse for a couple, at the 2026 official amounts.
• The temporary senior deduction (IRC §151(d)(5), added by P.L. 119-21) — $6,000 per person age 65 or older, reduced (not below zero) by 6% of modified AGI above $75,000 ($150,000 for a couple). Under current law it applies only to tax years 2025 through 2028 and is modeled as $0 from tax year 2029 onward; the other deductions continue. When a projection has no anchoring calendar year, the senior deduction is applied under its 2025–2028 rules for every year so saved plans replay deterministically.

Paying the tax bill

Federal tax and Medicare IRMAA surcharges are treated as an additional plan cost — paid on top of your spending, not out of it. If any guaranteed income (Social Security + pension/annuity) is left over after the year’s spending and loan payments, that surplus — already-taxed cash — pays the tax and IRMAA bill first. Only the shortfall beyond that is covered from a pre-tax account, and because the withdrawal used to pay the tax is itself taxable, the model “grosses up” the distribution: it solves for the total pre-tax withdrawal whose after-tax proceeds cover the remaining tax and IRMAA, with that withdrawal correctly counted as ordinary income. Anything the pre-tax balance cannot cover falls back to Roth. The model does not attempt a globally optimal choice of which account pays the tax.

Official year vs. future calendar-anchored years

Official 2026 Latest official year (2026)

Federal ordinary-income bracket edges, the standard deduction, and the §63(f) age-65 additional deduction come directly from the published IRS table (Rev. Proc. 2025-32) for the latest official tax year, currently 2026. A projection anchored to 2026 or earlier uses these exact figures. A projection with no calendar anchor keeps this frozen 2026 schedule for every year, regardless of the inflation assumption.

Projected assumption Future calendar-anchored years (2027+)

For years after the latest official table, the engine projects:

• ordinary-income bracket edges,
• the standard deduction,
• the §63(f) age-65 additional deduction,

using the scenario inflation assumption (including the higher-inflation scenario variant’s adjustment, never the temporary inflation-spike rate) and the statutory rounding convention — under IRC §1(f)(7)/(j)(5)(C) the inflation adjustment is applied to the increase and rounded down to the next lowest multiple of $50. With a 0% inflation assumption this reproduces the published 2026 table exactly.

What does not change:

• Tax rates remain at current statutory policy (10 / 12 / 22 / 24 / 32 / 35 / 37%).
• §86 Social Security taxation thresholds ($25,000 / $32,000 / $34,000 / $44,000) remain fixed — current law does not index them, and the model does not “fix” that by inflating them.
• NIIT thresholds ($200,000 / $250,000) remain fixed, for the same reason.
• The senior-deduction sunset (above) is a statutory date rule, not an inflation projection.

Official sources

• IRS Rev. Proc. 2025-32 — 2026 ordinary-income brackets, standard deduction, and §63(f) age-65 additional amount
• IRC §1(f)(7) / §1(j)(5)(C) — cost-of-living adjustment and $50 rounding convention for bracket and deduction amounts
• IRC §86(c) — fixed Social Security provisional-income thresholds
• IRC §151(d)(5) (P.L. 119-21) — temporary senior deduction, tax years 2025–2028
• IRC §1411 — fixed Net Investment Income Tax thresholds