How do taxes work for retirement withdrawals from taxable brokerage accounts?

You're mostly on the right track with your calculations, but let me clear up a few things. The standard deduction does apply before you calculate your taxable income, including capital gains. For 2025, the MFJ standard deduction will be around $30,000 (it's adjusted annually for inflation). This means you'd subtract that from your total income FIRST. For capital gains tax brackets, the 0% bracket applies to your taxable income, not just your capital gains. So you'd add any other income (interest, dividends, etc.) to your capital gains, subtract your standard deduction, and THEN apply the capital gains rates. For ACA subsidies, they use Modified Adjusted Gross Income (MAGI), which includes your capital gains. The $135k in gains would count toward your MAGI, but not the $45k of principal return since that's not income. ACA premiums are generally NOT pre-tax unless you're self-employed (then you might get a partial deduction). Hope this helps clear things up!

I went through this exact situation last year and ended up really confused when trying to figure out my taxes. I tried using regular tax software but kept getting different results depending on how I entered things. I finally found this AI tool called taxr.ai (https://taxr.ai) that specializes in investment and retirement tax questions. It was super helpful because I could upload my brokerage statements and it would identify which portions were capital gains vs. return of principal, and then calculate the tax implications. It even helped me figure out which specific lots to sell to optimize my tax situation for ACA subsidies. The best part was being able to run different withdrawal scenarios to see how they'd affect both my taxes and healthcare costs.

Just wanted to update - I tried out taxr.ai after being skeptical at first. Gotta say I'm impressed! I uploaded my last 3 years of brokerage statements and it showed me that I've been selling investments in pretty much the worst possible tax order. By changing which specific shares I sell, it looks like I can save about $4,200 in taxes on the withdrawals I'm planning for next year. The tool also showed me that if I stay below a certain MAGI threshold, my ACA premiums drop dramatically. I had no idea the cliff was so steep! Definitely going to structure my withdrawals differently now. Anyone else retiring before Medicare age should really look at this carefully.

If you're planning to manage your own retirement withdrawals, you'll probably need to talk to the IRS at some point. I tried calling them about capital gains questions for MONTHS and could never get through. The wait times were insane - I'd be on hold for 2+ hours and then get disconnected. I found this service called Claimyr (https://claimyr.com) that actually got me through to a real IRS agent in about 15 minutes. They have this smart system that navigates the IRS phone tree and waits on hold for you, then calls you when they have an agent on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with helped me understand how the capital gains taxation works with other income sources and confirmed that I was calculating my estimated tax payments correctly. Saved me a lot of stress and potential penalties.

I have to publicly eat my words about Claimyr. After posting that skeptical comment, I decided to try it myself because I had a complicated question about how my rental property depreciation interacts with capital gains in retirement. I was honestly shocked when I got a call back in about 20 minutes with an actual IRS tax specialist on the line. He walked me through the proper way to report my capital gains alongside passive income from my rental properties and cleared up my confusion about form 8949. For what it's worth, he also confirmed what someone mentioned earlier - the standard deduction DOES apply before calculating your capital gains tax brackets. This made a big difference in my planning because it effectively raises the 0% capital gains threshold by the standard deduction amount.

I retired 3 years ago at 57 and can share some practical experience. One thing that wasn't mentioned yet is tax-loss harvesting in your taxable accounts. Even in retirement, you should be looking for opportunities to offset some of your gains. Last year I was able to harvest about $12k in losses from some underperforming international funds, which directly offset $12k of my gains when I sold some appreciated stocks. That saved me about $1,800 in taxes that year. Also, don't forget that your capital gains plus your other income determines your Medicare IRMAA surcharges once you hit 65. If you can plan your withdrawals to stay under the IRMAA thresholds, you can save thousands in Medicare premiums later.

Has anyone here used Roth conversions as part of their strategy? I'm 56 and considering converting some traditional IRA money to Roth during years when my income is lower. Seems like it could help manage the tax brackets and ACA subsidies long-term.

Great discussion here! I'm in a similar situation planning for early retirement and wanted to add a few points that might help others: One thing to be really careful about is the Net Investment Income Tax (NIIT) - if your modified adjusted gross income exceeds $250k for married filing jointly, you'll pay an additional 3.8% tax on investment income including capital gains. This can push your effective capital gains rate from 15% to 18.8%. Also, regarding ACA subsidies, there are some "cliff effects" where small changes in income can dramatically impact your premiums. The subsidy calculations use very specific income thresholds, so it's worth modeling different withdrawal scenarios. Sometimes it's better to realize slightly less income to stay under a threshold, even if it means paying 0% capital gains tax on a smaller amount. For those managing their own withdrawals, consider the "bucket strategy" - keep 1-2 years of expenses in cash/CDs, 3-7 years in bonds, and the rest in stocks. This lets you avoid selling stocks during market downturns and gives you more flexibility in managing your annual tax situation. The tax planning in early retirement is definitely complex, but taking the time to understand these interactions can save thousands per year!