1. Taxes

2. Income taxes n Tax basics  Effective and marginal tax rates n What is taxable?  Pensions and annuities  Other income  Home sale gains n Paying taxes in retirement  Withholding  Estimated taxes n State taxes

3. Effective tax rate =Tax Taxable income Marginal tax rate = Rate applied to your last taxable dollar Useful for figuring after-tax return Basic concepts

4. See IRS Publication 575 - Pension and Annuity Income What is taxable? n Your City pension n Deferred Compensation Plan distributions n Social Security n Home sale gains

5. Your City pension n Partially tax-free as return of your after-tax contributions n After recovery of after-tax contributions, pension is fully taxable

6. Deferred Compensation Plan n All distributions fully taxable in year received n No early-withdrawal penalties n Can be rolled over into an IRA n Three-year catch-up provision available within three years of retirement eligibility n Age-based catch-up available to employees 50 years of age

7. Rules on IRAs n 10% federal penalty on withdrawals before age 59-1/2 n 2.5% California penalty n Must start withdrawing from an IRA by April 1 of year following age 70-1/2 according to formula n 50% penalty on underwithdrawals in year following age 70-1/2 or later

8. Social Security n Up to 85% may be taxable if income exceeds certain level

9. Home sale gains Exclusion available for capital gain n Conditions  Owned home two of last five years o Lived in home two of last five years o Have not used the exclusion in two-year period ending on sale date n Amount  Single: $250,000  Married: $500,000 (if both meet the “lived-in-it” and “have-not-used” requirements; otherwise $250,000)

10. Paying your tax n Timely payment required n Penalty for late payment n Withholding

11. * Other percentages may apply to certain high-income taxpayers Paying your tax n Estimated tax payments n No penalty if:  Less than $1,000 owed at filing time  100% of previous year's tax amount paid*  90% of current year's tax paid

12. State taxes n State income tax treatment of retirement income varies n Consult a local state tax expert n California income taxes

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