Reviewing Tax Analytics within your Plan

Once you have built your Plan there are multiple tabs at the top to choose from including: Plan, Cash Flow, Tax Analytics, Chance of Success, Compare, Optimize, Reports, Estate, and Settings. This article will walk through the Tax Analytics tab.

The Tax Analytics page will default to Plan Totals, but you can also click the dropdown arrow and choose Selected Year. From there, hover over the bar graph below and choose the year you want to dive into further.

Summary Metrics

There will be a default of 4 boxes containing:

• Total Legacy in dollars
• Average Effective Tax Rate as a percent
• Average Withdrawal Rate as a percent
• Lifetime Taxes paid in dollars

You can customize this by going to the dropdown at the top right, 4 Metrics, and select or unselect the default options or others such as Net Legacy, Liquid Net Worth, Income, etc. Next to 4 Metrics is a three dot menu with the options to Rearrange Metrics or Reset Metrics.

Graph Options

The graph will show Income, Taxes, Rates, Deductions, or Credits. You can choose to break down the graphs by Federal, State, or Local Taxes from the dropdown menu to the right of Credits. You can also choose from:

• Composition: standard taxable income breakdown.
• Rates: visualize income by tax rate.

If you choose Composition, the details on the right side of the graph will include total dollar amounts across your total plan broken down by Taxable Income, Capital Gains Income, Roth Conversions, RMDs, Standard Deduction, Mortgage Interest, etc.

If you choose Rates, the details on the right side of the graph will include the total dollar amounts across your entire plan taxed at specific rates, i.e. $149,314 at the 20.55% tax rate.

Brackets and Progression

Below the graph are two more options to dive further into Tax Analytics: Brackets and Progression.

Brackets will show a breakdown of tax brackets by income types, i.e. Wage Income, Ordinary Investment Income, Capital Gains Income, etc. If you hover over a specific bar you will see further details, such as how much is taxed at different brackets and your Effective Tax Rate. Below the graph will show a table of Income Type, Effective Tax Rate, Gross Income, Total Tax, and Net Income. This is a great way to see how you are taxed across different income streams throughout your plan.

Progression will show how extra income of each type would be taxed in the selected year based on your effective tax brackets. You’ll see how the marginal tax rate for each type of income would change as more hypothetical dollars are earned.

You may notice your Effective Tax Rate in ProjectionLab appears higher than on your tax return. ProjectionLab’s Effective Tax Rate is broader and includes FICA taxes (Social Security and Medicare).

Once you have insight on your Tax Analytics, this can be a great opportunity to use ProjectionLab’s Optimize feature to try optimizing different tax strategies.