The Go Curry Cracker 2013 Taxes post on how you can Never Pay Taxes Again has been quite popular.  It has been linked to, shared, cited, viewed, searched for, and commented upon more than any other post.  Many people love it, and are excited about the possibilities.  Others wonder, “Is it real?”  After all, if it sounds too good to be true, it usually is.

Let’s see what happens when the rubber meets the road.  And what better example than to review our very own 2013 Taxes?

Income this year was primarily from index fund and individual stock dividends, interest from a seller-financed mortgage on a property we sold a few years ago, and interest from our cash reserves and a municipal bond fund.

Total income was a little more than $37,037, which easily covered all of our 2013 travel expenses of $33,429 (although not our atypical and non-recurring expenses)

With this level of income, we had lots of opportunity to reduce future taxes.  We moved $12,028 into a ROTH IRA as part of an IRA Conversion, and also captured $44,197 of capital gains

All together, our adjusted gross income was $91,752.  How much tax did we pay on such a high figure?  You guessed it… $0

To explain, below you will find a copy of our 1040 and details about how it all plays out

f1040 page 1f1040 page 2

The 4 Principles in Action

You may remember the 4 principles from the original post on not paying taxes:

  • Choose leisure over work
  • Live well for less
  • Leverage ROTH IRA Conversions
  • Harvest Capital Losses AND Capital Gains

We lived all 4 principles as part of life and tax planning in 2013.

With no earned income, leisure was definitely the priority.  This is evident on Line 7, Wages, salary, etc… where we entered a big fat ZERO.  If you work for the man, you have to pay the man, but with no earned income we were able to eliminate FICA and earned income taxes

A married couple filing jointly has a standard deduction of $12,200 and personal exemptions of $7,800.  With these deductions, the first $20,000 of income from working, interest, short term capital gains, and ordinary dividends is tax free.  Additionally, if income from these sources is sufficiently low to keep our marginal rate at or below the 15% tax bracket (below $72,500) then qualified dividends are taxed at 0%

Our total cost of living is modest, which allows us to withdraw from the portfolio at below these rates.  We live well, for less

Because of our low interest income, we had the opportunity to convert Traditional IRA funds into a ROTH IRA, tax free.  Our $7,388 in taxable interest income means we can convert up to $12,612 from an IRA to a ROTH IRA tax free (total less than $20,000).  Line 15a show our $12,028 in distributions

Our qualified dividends of $23,675 mean we can harvest up to an additional $48,825 in gains that Mr. Market has provided over the past couple of years.  On Line 13 you can see where we had long term gains of $44,197 (we left about $4,500 on the table here.)  Some of this is from doing normal asset reallocation, and some is from deciding to sell funds primarily to lock-in the gain

But if earned and interest income was below $20k, and qualified dividends and capital gains were under $72,500, why does Line 44 show tax due of $388?

Because of those pesky non-qualified dividends.  We had $4,464 worth of them, which brought our total earned, interest, short term gain, non-qualified dividends, and IRA withdrawals to $23,880.  The $3,880 remaining after our $20,000 deductions was taxed at 10%, or $388

We didn’t know how many non-qualified dividends we would have before the end of 2013, so we had to make estimates and estimated low (a good thing overall, since total dividends were higher than expected.)

But wait…

Impossible to avoid, some foreign tax was withheld from an index fund we own that holds foreign stocks.  $430.03, to be exact.  This can be used to offset any US tax liability, which in our case completely wipes out any tax due.  (A pretty savvy move if I do say so myself) 😉

The end result:  Line 76, Amount you Owe = $0


With an adjusted gross income of $91,752, we paid no tax

All of this while harvesting some long term gains and doing a ROTH IRA Conversion, reducing or eliminating future tax liability

So there you go:  Clear evidence that by following the 4 principles, it is possible to live well in early retirement while paying no tax

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115 Responses to The Go Curry Cracker 2013 Taxes

  1. Doug Nordman says:

    Well played!

    Do you see this continuing for the next few years? It looks like you have plenty of margin for conversions and foreign taxes…

    • Go Curry Cracker says:

      Hi Nords! I don’t see any reason for this to ever change (barring any change in tax law.)

      The ROTH IRA Conversions and Capital Gain Harvesting are working to eliminate future taxes, at the same time as our low cost of living and focus on dividend income is ensuring we pay no tax today. We are probably done with taxes for life! 😀

      • Oh the joys of qualified dividend income 😉

        I expect that one day to never have to pay taxes as well, thanks to qualified dividends, long-term capital gains, and money I am silently accumulating in retirement accounts. I also plan to slowly convert those into Roth IRA once my tax bracket is low.

        My main problem is that I am paying way too much taxes in the accumulation stage, given that besides a 401K, maybe an HSA and for some a regular IRA, there are not that many legal ways to minimize salary income. And I am not like Justin to also have a 457 plan and a 401K.. Just 401K.. booo

        The problem I see with your plan is if your website becomes too successful, you write a book/magazine articles about your travels,which earns too much for you, and you would have to pay more in taxes. Of course, those are good problems to have 😉

  2. As Borat would say, “Veerrryy Nice.” I’m hoping I can get our 2013 1040 down to zero.

    Don’t you feel like a 1-Percenter now? :)

  3. Eli Inkrot says:

    Jeremy & Winnie, this is a fantastic post! I responded to your comment on my article and sent the link to Rockstar Finance, but felt compelled to comment here as well. Your story is certainly a motivating one and it deserves as much exposure as it can get.

    Thanks for sharing!


    • Go Curry Cracker says:

      Thank you Eli!

      Hopefully by sharing this one example many others will be able to take action on minimizing their taxes

  4. This is great! Looking forward to be in this position at some point. Taxes are such a drag!

  5. says:

    Wow that’s awesome! Did you prepare these manually or with the help of some program? (Turbo Tax, HR Block, ect…)

    • Go Curry Cracker says:

      I used Turbo Tax, because it imports everything from our brokerage and makes it easier overall to e-file. But before I start turbo tax, I already know what the end result will be

  6. Elizabeth says:

    This is awesome! Quick question for you….did you want until end of December to decide what dollar amount to convert to your Roth IRA (the $12,028) to keep it at or close to 0?

    • Go Curry Cracker says:

      Hi Elizabeth

      The ROTH IRA Conversion and all Capital Gain Harvesting happened in December

      It’s hard to predict exactly how much income we will have for the year before then

  7. Andrew says:

    This is very instructive. Thanks for sharing the nitty gritty.

    I’m preparing to retire soon myself, at 36. I hit that 4% mark at the end of 2013 and now I just need to figure out how I’m going to break my 18 year paycheck addiction.

    • J. Money says:

      Haha…. yes, those paycheck addictions can be tough! :)

      • Go Curry Cracker says:

        It’s one of those little talked about addictions that nearly everyone has… there is even a support group

        Common side effects include disinterest in work, desire to reward yourself with lattes (hell yeah I want whipped cream on that!), and obsessively checking the value of your portfolio

    • Go Curry Cracker says:


      It took us awhile to break the paycheck addiction as well… 2 or 3 years in fact

      I think it is a bit like pulling off a band-aid. Rip it off quickly and move on. It is now a year and a half later and we will never look back

  8. Wannabe says:

    Great post! Really enjoying your blog!

  9. Dave says:

    Nice, but with 70% of our retirement funds wrapped up a traditional rollover IRA and 401K, not sure how I can make withdraws without it being taxed as ordinary income. Other 30% is split between Roth IRA and CDs and a MM. Yes I see how to convert some of the Rollover IRA to Roth, but with the high percentage in the Rollover IRA, I don’t see how I can realistically avoid tapping it to fund expenses. Sure I could start by burning down the cash and Roth, but sooner or later I will have to tap the traditional IRA…..long before it could all be incrementally converted tax free to a Roth.

    • Go Curry Cracker says:

      Hi Dave,

      Without knowing more details, I’m not sure either. If you like, you can use the Contact form to send us more details and I’d be glad to take a look and see if I can make any suggestions. If partially depends on your cost of living (Live well for less)

      I would probably dump all taxable interest bearing instruments in the cash and brokerage accounts and put that into dividend paying stocks. With $0 in interest you could pull $20k out of the IRA/401k tax free (married, filing jointly.) For the remainder, you can spend the dividend income and the pull whatever else you need from the ROTH

      As problems go, “I saved too much in my 401k” is a good one to have

      All the best


  10. Noe says:

    You are one efficient financial planner. Impressive! You mention a seller-financed mortgage on a property…Did you at one point own a rental?

    • Go Curry Cracker says:

      Hi Noe

      Thank you, I was pretty happy when it all came together as planned

      We at one time had the rental from hell. Long story…

      • Jian says:

        Hi Jeremy & Winnie,

        Great post! Ever thought about turning the “rental from hell” story into a post, so your readers can learn from it? Mr. Collins did that and I at least found it instructive (and at times amusing, given I wasn’t the unlucky landlord :D).

      • brian says:

        That right there sounds like a new entry :) I’m sure there are others who are looking at rental property as in income stream. Might be interesting to hear from the perspective of FI

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  12. Jennifer says:

    Do you still have a home base that you need to file state taxes for too?

  13. Tom says:

    Would you also qualify for the Foreign Earned Income Exclusion for your IRA to Roth rollover since (I presume) you were out of the country for at least 330 days of the year?

    • Go Curry Cracker says:

      I don’t believe this applies, although I’m not an expert. The last couple of years we have been in the US at least a month or two, and with 0% tax already I haven’t pursued another angle

      A few thoughts on it though:
      – We don’t have Earned Income, either foreign or domestic, so their is no earned income to exclude. If someday we did have jobs in another country, then this would apply
      – The majority of our income is in the form of dividends and interest from US based corporations, and that income is earned within the US and taxable

  14. Fantastic post, really helps. Any idea if carried over capital losses can be held ‘in reserve’ if your long term capital gains are taxed at 0%? I’ve done tax loss harvesting, but maybe it doesn’t matter for equities held longer than a year…

    • Go Curry Cracker says:

      I don’t know if capital losses can be held in reserve. It isn’t something we have had to do

      If you are in situation similar to us with 0% capital gains tax, then those capital losses won’t be of benefit unless the law changes. You could however choose to harvest additional gains one year and use the losses to bring the total back below the tax threshold

  15. wyldflamingo says:

    Fantastic post, Jeremy. I am indeed obsessively checking portfolio value…you make it easy to want to.

    • Go Curry Cracker says:

      I used to be a card carrying member of Obsessive Portfolio Gazers Anonymous, but I don’t think I’ve looked now since last December when doing the ROTH IRA Conversions and Capital Gain Harvesting.

      At some point I think I just internalized that (past a certain point) it doesn’t really matter what the portfolio is worth

      If you are looking for a sponsor, let me know 😉

  16. You really need to open a fund so I can get in on your investing prowess :) Good point about the losses offsetting additional gains. I’m not much of a money mover, other than the Roth IRA conversion, so I’ll probably just keep taking the annual 3000 capital loss allowance in ER. Thanks.

    • Go Curry Cracker says:

      My fund has an incredibly low expense ratio of only 1.5%. Sign up now! lol

      Seriously though, I don’t really have any investing prowess. Our primary fund is just VTI (or VTSAX.) The last few years have been quite kind to anybody invested in a market index fund, and while working we seldom sold anything since we were thinking long term

  17. retiringsoon says:

    This is so incredibly helpful to see! I will be doing this with the 2014 taxes next year and had already educated myself on the deductions, staying within the 15% tax bracket in order to make capital gains non-taxable, doing Roth conversions up to the deduction amounts and resetting cost bases by selling and repurchasing same holdings (or using the exercise to rebalance).

    I do have a question or two: What worksheet did you use to go from that line 43 Taxable Income to the line 44 Tax? And I think I missed somewhere in my research (or didn’t internalize it) that Qualified Dividends will be removed from the Taxable Income in the 10% and 15% tax brackets. Am I understanding that right from your article?

    Thank you again so much for publishing this! I’m really excited to see it!

    • Go Curry Cracker says:

      Hi retiringsoon, you are understanding it correctly

      See the comment I just made to John Rush, it should make everything clear

      I also recommend going through the Qualified Dividends and Capital Gains Tax Worksheet with the numbers from our 1040.

      All the best


  18. John Rush says:

    Very nice post, and based on your writings, I am trying to learn how to be more tax efficient. For this post, the only question I have is how you calculated line 44 as $388. Your line 43 is $71,752; the value of this line is used in the tax tables, not the value of line 7, correct? So according to the 2013 tax tables, shouldn’t your line 44 be $9,874? Again, I am learning, so it’s likely I missed something important.

    • Go Curry Cracker says:

      Hi John

      Let’s go through it

      The first thing on Line 44 says “See instructions”

      When we look at those, there is this note:
      Qualified Dividends and Capital Gain Tax Worksheet.
      Use the Qualified Dividends and Capital Gain Tax Worksheet, later, to figure your tax if you do not have to use the Schedule D Tax Worksheet and if any of the following applies.
      – You reported qualified dividends on Form 1040, line 9b

      Since this first bullet applies to us, we use the Qualified Dividends and Capital Gains Tax Worksheet. This is where the difference between Earned Income and investment income really becomes clear

      On the Qualified Dividends and Capital Gains Tax Worksheet, I recommend walking through it

      Line 8 shows the value of tax free income, $72,500 for a married couple filing jointly

      On Line 11, this is removed from total taxable income with the comment, “This amount is taxed at 0%”

      It is pretty amazing when you go through it the first time

      Hope this helps!


      • John Rush says:

        Thanks Jeremy! I thought I was missing something important!

      • John Rush says:

        Just to follow up… I worked through the Qualified Dividends and Capital Gains Tax Worksheet you cited. The worksheet calculations confirmed your tax at $388 and my 2013 tax at $7,004. Furthermore and most important, I was able to tax plan 2014 so my tax will be $463, which is $6,541 less than 2013! I would not have had a clue if it had not been for your posts, so thank you again, Jeremy!

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  20. Peter says:

    Wow. You have some amazing tax benefits that we do not enjoy in Canada. First off no state income tax. Then having to pay no capital gains tax below $72500 with interest income below $15k! I am not really familiar with all the differences between 401K, IRA and Roth IRA. We have similar retirement accounts here – but no allowances to convert from one to the other as you have explained.

    Not complaining here – just thinking there have to be some strategies in Canada that I may not have found. That or I need to look into moving!

    • Jian says:

      Actually, this shows the glaring bias against working families in the US tax codes! I personally never bought (and don’t understand why it’s still largely accepted as conventional wisdom) the idea that capital gains (long-term ones at least) ought be taxed at lower rate than earned income. If anything, it should be higher. Of course, this bias is just Exhibit A for the power of lobbying.

      On the other hand, this rather unfair tax code does give those of us so inclined a great way to plan our finances and lower our tax bills.

      • Go Curry Cracker says:

        I think this more showcases the “something for everybody” aspect of the US tax code. Corporations get deductions for R&D, retirees get breaks on dividends, students get discounted education loans, landlords get depreciation deductions, and working class families get mortgage interest deductions, child tax credits, 401k’s and IRA’s, and no capital gains on the sale of a primary home, etc… (and CPA’s get to charge high bill rates to do all the paperwork)

        The majority of working families pay no income tax (but pay a high percentage of income towards Social Security) so it is hard to argue that the tax code is biased against families. A dual income family in Silicon Valley would pay a lot of tax, but they would also be in the top 10% of families by income (source: )

        It isn’t necessarily better in other countries. The high VAT in the EU is regressive, and many countries have no capital gain tax at all

        The “something for everybody” aspect of the US tax code has a high compliance cost, both in terms of time and $. I’ve seen estimates from 2% to 5% of GDP. A more simple tax code with lower rates but fewer deductions has been proposed multiple times, but not gained much traction. Lobbying is probably one reason that change hasn’t happened, including lobby groups that represent working families, tax preparers, senior citizens, retirees, etc…

  21. Great post. Thank you for the insight. In my mind, planning my early retirement, I’ve had intentions to do what you’re doing except while filling up the 15% bracket. Your details open my mind to the possibility of my plan working in the 0% and 10% brackets.

  22. SDREMNGR says:

    I know this isn’t going to be a very popular sentiment around here, but how about the concept of “civic duty?” I applaud your ingenuity and cleverness in reducing your taxes to zero, but then who pays the taxes? Obviously someone has to. If not now, then in the future. In the end, the tax burden is shouldered, inordinately, by people who are in the 25% – 40% tax bracket as a percentage of their income. Again, I’m not blaming you, for playing by the rules, as are many of the really rich.

    I really think we need to change the systematic bias toward investment income, vs. earned income. I know the arguments on how the lower tax rate on investments is supposed to induce people to save more, but in effect, all it does is reward the lazy rich into not working and punish productivity of the worker. I don’t blame you for maximizing your situation, I blame the system for being faulty and allowing it.

    I’m not a welfare mom (or Dad, as I’m a guy) with 8 kids. I in fact have an Ivy League college degree (worked my way through school and paid off my student loans 2 years out), own my own company, have saved almost $1 mil working over the years (am 36 yo), and pay an “average rate” of taxes for myself and my employees and take pride in doing so. I don’t agree with everything the government does but I do see the benefit that everyone gets from living in the U.S. I was born overseas and see the vast difference between the benefits of having a government like the one in U.S. vs. some of the alternatives out there. And all of that takes $$$.

    Between the rich people who are dodging taxes on one side, and people who are sucking up our resources on welfare while not providing any productivity to society, I feel like I’m living in a country and the world, where many are shirking their fair share of social responsibility. Only the people who voluntarily pay a higher rate of taxes, or people not smart enough to figure out the tax system are burdened with paying for it. While FOX News and company love to highlight the abuses of the system by some of the poor and I agree with them that they are scumbags for doing so, the dollar value of the scamming is much much greater in the tax burden avoided by those who understand and work the tax loopholes.

    • Go Curry Cracker says:

      Thank you for sharing another perspective. I don’t know if it will be popular, but I certainly appreciate it. I’m sure if we sat down for coffee we would agree on many things.

      While taxes are important, I would consider them only a portion of an individuals overall contribution to society. As many people don’t measure their self-worth by their job title or the size of their wallet, I think few people would measure a person’s societal contributions by the size of their tax payments. Jonas Salk and Mother Theresa come to mind as just two examples

      Government is also only one portion of our society, which is one reason that charitable donations are tax deductible. NGOs exist for a reason, namely that government is sometimes unwilling or unable to address issues regardless of how much income it has. Needs and values are diverse, and not always in alignment with the majority of voters

      In the end, even though our tax payments over the coming years will be low, I don’t doubt that our overall contribution to society will be net positive, both in financial and non-financial terms

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  24. Joe S. says:

    Jeremy, the one downside to not paying social security tax going forward is that your payout when you retire will be lower than a person paying as they continue to work….am I correct about this? If so, then the loss of a “annuity product for life” can be a mojor problem. Your response is much appreciated.


  25. free2pursue says:

    Wow. Well played. I bow to your advanced tax planning skills. What motivation to see how I can improve my tax situation!

  26. Sparky says:

    I would like to direct this comment in response to SDREMNGR above. Your lecture does not mention the fact that a tax on dividends, interest, and capital gains is actually a second tax on a tax payer’s money. The first was already paid when the taxpayer earned the money in the first place. I consider that second tax to be blatantly unfair, and against the principles of our founding fathers. Particularly so, because those second taxes are sent to a bloated federal government run by out of touch bureaucrats. Additionally, nothing illegal or immoral was done to accomplish the $ 0 tax bill.

    • Milo says:

      This is misleading.

      Yes, you paid tax on the money before you purchased your fund/stock, but once a NEW GAIN is made, you have not been taxed on that increase in value. It is very reasonable that this gain is taxed.

      Hey, I’m living on my investment income too, but let’s be fair.

      • David Wolf says:

        To be completely fair the government should pay me whenever I realize a capital loss, right?

      • Brian says:

        You are incorrect. Dividends are corporate profits distributed to the corporation owners. They were already taxed as corporate profits. FYI, the US has the highest corporate tax rate in the developed world so do not be concerned that GCC may not be paying his fair share as a corporation owner.

  27. Mrs Nickels @ mySHINYnickels says:

    Just found your blog, and this post alone is enough to make me a fan. I’m already on the path to early retirement, and thought I couldn’t be any more obsessed in getting there. WRONG. After paying my federal tax bill today of $3,000, and reading this mind-blowing post, I’ve got determination coming out of my ears. Thanks for giving me yet another reason to blow this popsicle stand I call work.

    • Go Curry Cracker says:

      Wonderful! Thank you Mrs Nickels, and welcome

      US Tax laws are very kind to an early retiree. Hopefully your $3k tax bill will be one of your last :)

  28. Andrew says:

    Excellent article. I love tax efficiency articles. Quick question that I have. If you are doing roth conversions every year until the year you turn 70.5, you should be able to minimize your tax liabilities by harvesting gains and doing roth conversions each year. Once you turn 70.5, hypothetically you could be in a larger tax brackets because of a required minimum distribution on a large traditional/rollover IRA that was not converted (if you can only convert $10k-$20k a year depending on non-qual dividends). For people that would be working a little bit longer than 10-15 years, could it be advantageous to save larger amounts in a taxable account since you can choose when to take the gains on a low dividend etf? On the other hand, you’ll probably have to pay a higher dividend rate and pay taxes on the money to even get it to a taxable account. Would you always recommend maxing the 401k and iras even if the trad 401k/IRA is getting very large and will incur a huge RMD?

    • Go Curry Cracker says:

      Hi Andrew

      Yes, I would always recommend maxing the 401k and IRAs except in some cases where income is low. Tax deferral is a wonderful gift, it would be a shame not to use it. I would also recommend saving additional funds in a taxable account each year, if income is high enough to allow it

      In a case where the taxable accounts are large and there is insufficient time to convert everything to a ROTH before age 70.5, then RMDs would be required. Taxable accounts would need to be greater ~$550k for those withdrawals to exceed $20k at age 70, and for somebody that has worked and invested for 40+ years this is likely to be the case. Taxes will need to be paid, but the net result should be lower lifetime taxes paid and greater networth due to tax deferral



      • Brian Sales says:

        Awesome blog
        Questions I will be FI in 10 yrs but my wife will be five yrs into making 200k as a doctor she plans on working for 30 yrs.
        Can I still use Roth conversation or will our combined income be to high?
        Right now I am just putting in enough in my 401k to get the match the rest is going into stocks and a rental.

  29. TJ says:

    Of course yoiu can, but aren’t you required to use them when you have them subject to the $3k max, meaning you can’t just save them until you have enough income for the 15% bracket because you are in the 0% bracket now…

  30. SpencerM says:


    Great posts and 1040 illustration. Thanks.

    I have a similar situation and my 1040 was very similar to yours, except for pension income in place of capital gains. However now I have agreed to do a contract job that will add $150K for one year. That has seriously impacted my tax planning. Any ideas, other than bite the bullet? Seems if I do I will be paying $40K in taxes…ouch.

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  32. ervinshiznit says:

    So I learned an interesting thing about Roth conversion recharacterizations which I thought you might be interested in.

    An IRA conversion can be recharacterized in part or full by the tax filing deadline (or by October if you file for an extension). Recharacterizing a conversion means treating the conversion as if it never happened. What this means for you is that you can always fill up the tax free income given by your standard deduction + exemption + foreign tax credit by converting more than that amount in a given year, and then recharacterizing the excess when you file your taxes.

    Also, if you convert and the Roth value drops significantly, you can recharacterize all of it so you don’t pay the taxes on converting to a Roth that lost value.

    Of course, this involves more paperwork, which may or may not be worth it to you.

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  34. brian says:

    Great example, and it’s really got me thinking about our future tax situations. Would you mind posting your Schedule D and any Schedule Ks that went along with this filing? I think it would help me flesh out the complete picture. Thanks.

    • Go Curry Cracker says:

      Hey Brian

      No Schedule K in 2013. Schedule D is 90% dividends from VTI / VTSAX and Long Term Capital Gains done solely to reset the cost basis

  35. Erik says:

    I heard your interview yesterday on “The Radical Personal Finance” podcast where this tax return was mentioned. FANTABULOUS!!!

    As I read over your filing I found to boxes empty that I believe should have been filled.

    Line 46 – 388
    Line 55 – 0

    Based on the instructions Line 46 must be filled in with 388 in order for the math to work out in Line 55 to equal 0. I am sure that Turbo Tax filled these in for you and that this is just a typo. I am not sure if the KGB I mean IRS would have figured out how to bring add line 44 & 45 put that in line 46 and then subtract line 54 from line 46 and put 0 in line 55.

    Great example of how you don’t have to be a 1% to not pay taxes!!! You just have to read. Having $91K to live on that hasn’t been taxed is far easier than $91K that has been taxed before you even brought it home. I think that is a major point for people to understand, when you don’t have SS, Fed, State taxes dipping into the distribution before you get your hands on it is HUGE.

    Congrats on the baby.

    • Go Curry Cracker says:

      Thanks Erik, we are excited to add GCCjr to the family. It will be an adventure for sure

      Thanks for confirming that the tax bill was indeed $0.

      Even better than having $91k in tax free income is having $91k in tax free income and living well on only $36k of it.

      Most of the income was imaginary, just moving money around that generated taxable events. We moved some $ from a Traditional IRA to a ROTH IRA, and we sold an appreciated stock and bought another. Since we didn’t spend any of this, it can continue to create additional tax-free wealth

      But you are right, you don’t need to be part of the 1%. You just need to make saving a priority and follow the 4 Rules for tax-free living



      • Scott Dyk says:

        Wow, this is great! Thank you so much! I am trying to process this as a 43 year old with a family, who caught on late.

        One question that I have, as you have just stated, most of the income was imaginary …… But what about actual cash income? I see the taxable interest as probably cash cominng to you, but where does the rest of the ‘Total income was a little more than $37,037’ come from? Was there some of the sales of appreciated stock that were counted as capital gains, but you did not re-invest, but kept the cash?

        Thanks a ton for helping me out, I see this as something I should understand as I run the numbers on pre-tax vs. taxable investments for my specific scenario.

  36. Joe says:

    Great post and very thought provoking. At what level of AGI would the AMT become an issue? Put another way, what’s the most a hypothetical person could earn in passive income while still paying zero taxes?

    • Go Curry Cracker says:

      Hi Joe

      The AMT just reduces allowable deductions. Since we use only the standard deduction and exemptions, there are no deductions that can be eliminated. As such, the AMT doesn’t apply

      We basically “earned” the max. Earned income up to the standard deduction and exemptions (~$20k) and tax-free dividend and LT capital gain up to the limits (~$72k for married filing jointly.)

      If we had any additional income, we would have paid tax



      • Joe says:

        That makes sense. what if we bring munis into the picture? So let’s say tomorrow you received a $100mm inheritance (net of all estate taxes, etc.). Would you be able buy Munis and collect millions of dollars in coupons each year tax free? I feel like the government must have some sort of cap on tax free income that an individual can receive.

        • Go Curry Cracker says:

          When the inheritance check arrives I’ll consult with a tax attorney and estate planner and let you know what they say

          Of course, with the caveat that one should probably not let the tax tail wag the dog. I’d rather have $100 mm in diversified investments and pay a lot of tax than $100 mm in muni’s and pay $0

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  40. PG says:

    I thought you needed earned income in order to convert IRA funds to a Roth IRA?

    • Go Curry Cracker says:

      Hi PG

      You need earned income to contribute to a ROTH IRA or a Traditional IRA. But once you have a Traditional IRA, you can convert it (in whole or part) to a ROTH IRA at any time.

  41. PG says:

    Gotcha — I thought that might be the answer, but I wasn’t sure. After looking over this post again, I have to imagine you were making some serious money during the years before you went ER. Either that, or you owned some stock in a company that went IPO and skyrocketed or something along those lines. Here’s my reasoning…

    You say you had $23,675 in qualified dividends. Am I correct to assume those are in a taxable account? If so, let’s assume you are 100% invested in the 25 highest yielding dividend aristocrat stocks. The average dividend for those 25 stocks is 2.8%. In order to earn $23,675 in qualified dividends at 2.8%, you would need a nest egg of $845,000.

    My wife and I have both been maxing out our 401Ks for over 20 years, maxing out our Roth IRAs for about 7 years, and maxing out an HSA for about 3 years. And we literally just hit the same number ($845K) this year in all our accounts combined! But somehow you did it in what, 10 years? I give up: what was your secret?

    Sorry if I sound like a curmudgeon, I actually like your site and admire what you’re doing, and if I was about 20 years younger I might seriously consider it myself. I’m just having trouble making the numbers work, that’s all. Peace.

    • Go Curry Cracker says:

      Hi PG, to be considered a curmudgeon, I think you need to say something like “This is all BS, nobody could ever do what you do, and besides you are ugly, your goals are dumb, and your Mom hates you”

      I think you are safe :)

      You are correct, for the dividends to be on the tax return they have to be in a taxable account

      Am I understanding your contributions correctly? 2 people maxing out a 401k for 20 years, 2 people maxing our a ROTH IRA for 7 years, and a max family contribution to an HSA for 3 years?

      Total contributions for that time frame are almost $625k, assuming $0 in match on the 401k. For this to be worth $845k today, that is only a 3.4% annual rate of return, barely 1% greater than inflation over that time

      What type of asset allocation do you have? This is probably the largest difference

      We both worked in high tech, but salaries were average. In total I worked about 16 years. Starting with student loan debt meant I had to dig out of a hole at the beginning

      The key for us was saving a high percentage of income and investing primarily in stocks


      • PG says:

        Sorry for the long post, but here goes…

        I started contributing to a 401K in 1992 (that was my first job that had a 401K plan). My wife is 2-1/2 years younger than me so she probably started around 1994-1995. There was a one-year period between 2000-2001 where I was not working and so not making contributions. I don’t even recall what I was invested in, but I knew nothing about investing and probably just had a smattering of whatever high-cost active mutual funds my company provided.

        When I met my wife in 2003 she had roughly the same amount in her 401K, so I assume she had been making more or less the same contributions as I had (or else she was a better investor than I was). We both had a high proportion of stock funds, so we got creamed in 2008-2009, losing about 1/3 of our 401K value. That’s when we hired a financial advisor to manage our accounts for about 3 years while I educated myself on investing (name any book or academic whitepaper on investing and I’ve probably read it). We also opened our Roth IRAs around this time (2008 or 2009).

        I then took back control of our accounts in 2012 and have managed them ever since, being very broadly diversified so as to avoid major draw-downs like we had in 2008-2009. Our allocation across all 6 accounts is roughly 50% stocks, 20% bonds, 20% commodities, and 10% REITs. We have roughly half the volatility of the S&P 500, so when it’s up 20% we’re up 10%, and when it’s down 20% we’re down 10%, etc. We have a 10-12 year time horizon before we retire, so Warren Buffet’s #1 rule (don’t lose money) is becoming more of a focus for us.

        Thinking back maybe I wasn’t maxing out my 401K for the first few years I was contributing, but then again I wasn’t earning that much and I was living in L.A. Not sure how much my wife was contributing, but we ended up with the same amount so probably pretty similar to me in that regard.

        In any event, my tracking spreadsheet predicts we’ll have around $2.5M when I turn 60, and assuming 4% withdrawals we’ll still continue to earn more than we withdraw until I turn 80, when we’ll hit the $3.5M mark and then start drawing down principle (or not).

        Thanks to your site I’m cooking up a plan to shift as much of our IRA assets into our Roth IRA tax-free little by little each year after we retire. I’ll be reviewing my plan with a financial advisor later this year to confirm it makes sense. I’d be happy to share my plan here if you think anyone else cares to hear it.

        Thanks for the great ideas! Keep on going, curry cracker.

        • Go Curry Cracker says:

          This all seems reasonable, although having 20% of assets in commodities, which generate no income of their own, seems excessive.

          As a fellow Warren Buffett fan, I like his take on gold and commodities:

          “I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.”

          “The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”

          • PG says:

            I’m familiar with Warren Buffet’s views on gold. I’m also familiar with Harry Browne’s views on gold. Yes. I’m a proponent of the Permanent Portfolio for a portion of my assets. I hold 12% in gold, the remainder (8%) split between broad basket commodities and energy. Definitely a hedge against inflation play, especially in this historic low interest rate environment. I plan on shifting out of everything but gold on the commodities side over the next 5-10 years as the interest rate rises (which it will). If you’re not familiar with the Permanent Portfolio then let me know and I’ll be happy to share my knowledge. I met Harry in 1996 when he was running for president on the Libertarian ticket. He signed one of his books for me, which I still have to this day. Thanks for your time, and stay golden.

            • Go Curry Cracker says:

              I read Harry’s book, How I Found Freedom in an Unfree World. It’s a good read

              I’m familiar with his Permanent Portfolio as well

  42. PG says:

    Then you owe it to yourself to read Harry’s book “Why Government Doesn’t Work.”. Life changing.

    • Go Curry Cracker says:

      I’ve read it. Usually if I want to study an investment approach, I’ll read many books by the same author to understand the philosophy behind the investor

      I find his investment approach and politics both to be a little over simplified and to come from a different value system (not right, not wrong, just different)

      • PG says:

        I know what you mean, re: Harry’s investment approach. My biggest concern is whether the PP will perform in the future as it has in the past. That’s why I haven’t committed my entire portfolio to the PP. I try to combine a few different investing approaches into a hybrid approach. Basically, I don’t trust any single person when it comes to investing. If only I had a crystal ball. :-)

  43. gilstrac says:

    I am not a tax guy. I see on line 43 you have 71752 for income and the next line is tax of 388. It seems something is missing or i am missing something. How is the 388 arrived at from the 71752 of income?

    • Go Curry Cracker says:

      Hi Gilstrac

      It seems strange, right?

      See my reply to John Rush’s comment half way up

      • gilstrac says:

        Thanks, got it…the worksheet image would make it easier for us challenged to people to understand. congrads…I am not in a position to do this or at least I don’t think so. Breaking the paycheck addiction would be very hard. But it got me thinking is this a strategy that could be applied with a couple working as a team. Married filing separately or divorce on paper. Any thoughts?

        • Go Curry Cracker says:

          I’ll do better next time

          I don’t see many cases where two single people or married filing separately has any tax benefit. Usually the opposite

  44. kumar says:

    What about taxes of the resident country? I think you are in Taiwan. Does Taiwan wont tax your US Income?

    • Go Curry Cracker says:

      I had the same question

      I’m not technically a resident of Taiwan, but if I were any foreign income less than 6 million TWD (~$185k USD) is not taxed

      Similar policies exist in many other countries, encouraging foreign citizens with secure finances to settle in the host country. It’s a great stimulus to the local economy even without taxation

      • kumar says:

        Thanks for answering my question. your blog inspired me for early retirement. I plan for retiring in India, turns out there is no such deal in India. :(

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  46. Brian says:

    In respect to the following statement: “Our $7,388 in taxable interest income means we can convert up to $12,612 from an IRA to a ROTH IRA tax free (total less than $20,000).” It sounds like this tax exemption of 20,000 applies also to the “pentalty” tax applied to early withdrawal on the IRA. Could you clarify that? I’m assuming since the “penalty” is just additional tax and that 20,000 is tax free, you are not penalized on the early withdrawal.

    I”ll have to do a little more research on qualified dividends, but holy shit this was a great article. This is stuff I legitimately had no idea about.

    • Go Curry Cracker says:

      The ~$20k is just the Standard Deduction and Personal Exemptions

      There is no penalty for early withdrawal from an IRA in this case, since it is the result of a Roth IRA Conversion. The full amount of the Conversion is considered taxable income, which is then covered by the deductions

      It is a little odd when you first come across the possibility of paying no tax. I didn’t believe it until I saw all the filing documents in front of us and TurboTax confirmed

  47. Ariel says:

    I just found your blog and am AVIDLY curious. My wife and I are planning fairly early retirement (not nearly as early as you) with above average pensions so many of your topics intrigue me. One question that instantly comes to mind is, after I retire at 55 and begin receiving a pension (i.e. unearned income) would I still qualify for the annual conversion of part of my IRA account to a ROTH IRA account?

    • Go Curry Cracker says:

      You can do a Roth IRA conversion at any time, at any income level. Taxes apply. In our case, the tax rate is 0%. With a pension, it will be higher

    • So, you might want to go take a seminar about your pension. My wife has one and her’s is considered earned income. While not W2 income, it is not investment income subject to capital gains, it’s treated like W2 income.

      On my drawdown spreadsheet that is also estimating taxes and accounting for rollover conversions, I treat the pension as income and then take the diff between the 15% income max and pension received and use that amount as the basis for conversions. And the pension will be more than the standard deduction and personal exemption, so we’ll be paying taxes

  48. chris says:

    What about the 10% premature distribution tax for taking money from a 401k or qualified plan before age 59 and a half?

    • Go Curry Cracker says:

      Hi Chris

      The only withdrawal from a qualified plan is part of a Roth IRA Conversion. There is no penalty on Roth IRA Conversions

  49. Todd says:

    Can conversions be done up to April 15th or do they have to be in the calendar year for the filing?

    • Go Curry Cracker says:

      The conversion must be done before 12/31

      But you can recharacterize the conversion up until you file, so 4/15 (or even Oct with extension). Recharacterizing allows you to pretend the conversion never happened, in whole or in part

      The best practice would be to do a conversion before 12/31, estimating high (too much), and then partially recharacterizing when filing to arrive at the perfect/ideal amount

  50. Todd says:

    What about state taxes?

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