Advice about filing a 1040ES for the first time during your first year of retirement with living off of $55,000 of Capital gains and no IRA withdrawals

[cputman]

More information would be needed to correctly answer this for you. Your age, filing status and if you are collecting social security would all effect this out come. For now I will assume that this is the only income you have and that you are single. You would get to deduct the standard deduction for a single person (Single Filers and Married Persons Filing Separately: $15,750) and then would be taxed on the remaining amount ($39,250). It also matters if these are short term or long term capital gains. The tax rates are different for each. Assuming these are short term gains the tax would be about $4700. Here is a link for our calculator (https://turbotax.intuit.com/tax-tools/investment-tax-calculators/), so that you can put in your specific information to figure your tax. The final amount would be split between the estimated payments that you are making.

[Mark_5]

1. Greetings JR
   
    If you are a single taxpayer and your only income is the capital gain if it is long term. 
   Consider the $50,000 gain less the standard deduction $15,750 = $34,250.
   Applying the 0% capital gains rate, your $34,250 is less that the maximum of the bracket for long term gains ($48,350 single filers in 2025).
   If the gain is short term you will be looking at ordinary taxable income.
   
   We have a capital gains calculator that you may use for changes in your situation.
   https://blog.turbotax.intuit.com/income-and-investments/capital-gains-tax-calculator-48615/ 
   And there are other calculators that you may use including one for the most recent tax changes.
   https://blog.turbotax.intuit.com/collection/calculators/
   
   Thanks for the question!! Hope this helps!

[JRretires]

Thanks, I am 67 and not taking Social Security yet.  The Capital Gains is long term, the stocks sold were over two years old.  Under this scenario, how much money could I withdraw from my IRA the last two months of the year.  $14,000 dollars?  Any advice about filing a 1040ES for the first time as a retired person with no other additional income than above?

[JRretires]

Thank you, I am 67 not taking Social Security yet.   The Capital Gains is long term, stock sold was over 4 years old.  I have no other income in retirement..  Any advice about filing a 1040ES for the the first time in retirement.  If I need to , how much money can I withdraw from my IRA for the last two months of the year for my living expenses.  It seems like $14,000 dollars to keep my Capital Gains gains at the minimum rate.  I assume I will now also have an additional deduction for being over 65 years old.

[Mark_5 · Accepted solution]

JR,
Thank you for your follow-up question.
For $55,000 gain less the standard deduction $15,750 = $34,250.
You will have an additional standard deduction for being 65 or older (single filer) of $2,000.
(Note: There is also a "bonus" deduction for seniors in 2025 (through 2028), up to an additional $6,000, for single filers with a Modified Adjusted Gross Income (MAGI) of $75,000 or less. In your case, with only $55,000 in capital gains, your MAGI would be below this threshold, making you eligible for the full $6,000 deduction, bringing your total standard deduction to $15,750 + $2,000 + $6,000 = $23,750).
55,000 - 23750 = 31250 which is below the $48,350 max for the 0% bracket.  You would have an estimated 17,100 more in long term gains before moving up to the 15% tax bracket.

Please check the tax calculators as we get closer to the end of the year.  Even though the recent tax legislation has passed the IRS is still in the process of codifying it.

[JRretires]

Thank you again for the follow up answer.  You mentioned an additional allowed $17,000 of Capital Gains, does that  also mean I could withdraw $17,000 dollars from my IRA for my living expenses for the last two months of the year.  I actually never expected to get 10 months into my first year of retirement without any withdrawals from my IRA.  Lastly, my original question was do you have any recommendations or advice for filing a 1040ES since I have never filed one before when I was working?

[JotikaT2]

IRA withdrawals are actually taxed at ordinary income tax rates and therefore would not be considered as part of the capital gains tax rates.  You can still make the IRA withdrawals but they will be subject to ordinary tax rates.

As for 1040ES estimated tax payments, please see this link for guidance on how you can estimate your estimated taxes and make those federal estimated tax payments.  You can also use the TurboTax TaxCaster to determine what your tax liability may be for 2025.

@JRretires 

[JRretires]

Thank you for your answer.  I guess I am concerned that withdrawing money from my IRA with my Capital Gains will bump me up so I have to pay the higher Capital Gains tax.

[JRretires]

Thank you for taking the time to answer my question.  I am filing my 1040ES in August before I make or take the IRA withdrawals.  Do I just assume that I am making the withdrawals from the IRA and estimate this $5800 tax you estimated and when I would I submit the payments?   Or the taxes are withheld when I make the withdrawals from the Schwab IRA the last two months of the year?

[JotikaT2]

It is possible you would get bumped up into a higher capital gains tax bracket since the IRA distribution will increase your taxable income.  The best way to estimate it would be to use the calculators provided by Mark_5.  These calculators would help you determine what your potential tax liability would be based upon your actual circumstances.  While we can provide rough estimates based upon hypothetical situations, we cannot ensure we know the entire "tax" picture.  

Please see this link for the actual tax calculator to use to help you determine your estimated tax liability.  Be sure to account for all of your sources of income and deductions you expect for 2025.

As for the IRA withdrawal, you will need to ask your financial broker to withhold federal (and state if applicable) taxes from the distributions.  If you use this option and are able to withhold enough tax to cover your anticipated tax due when filing, you may not need to make estimated tax payments.  The IRS has a tax withholding estimator that you can use to determine how much you should have withheld from your IRA distributions.

If instead you still want to make estimated tax payments, those amounts would be due quarterly as you earn the income.  The next estimated tax payment dates are September 15, 2025 and January 15, 2026.