54 articles, written for financial professionals. Each one documents a single calculation: how it works step by step, the IRC sections and IRS publications behind it, what drives the result, and its limitations.
Tax Calculations
How federal and state tax is computed year by year — brackets, capital gains netting, IRMAA, FICA, and the survivor filing-status shift.
ACA Subsidy Corridor
Where a pre-Medicare household's income sits relative to marketplace subsidy eligibility — the floor below which coverage shifts to Medicaid, and the ceiling above which premium credits end
Capital Gains Tax Calculation
How long-term capital gains are taxed at preferential 0%, 15%, and 20% rates based on taxable income.
Federal Ordinary Income Tax
How federal income tax is calculated using progressive tax brackets
FICA Taxes
Calculates Social Security tax (6.2% up to wage base), Medicare tax (1.45% + 0.9% additional Medicare tax), and self-employment tax (15.3%) for business income. Includes wage base limits and high-income thresholds.
IRMAA (Medicare Surcharge) Calculation
How Medicare Part B and Part D premiums increase based on income from 2 years prior
Roth Conversion Tax Impact
How Roth conversions add to taxable income and fill lower tax brackets
State Income Tax
Automatic state income tax projection using effective rates, with exemptions for Social Security, retirement income, and federal/government pensions.
Tax Projection Model
Multi-year federal tax calculation system integrating income, deductions, credits, and strategies to project tax liability across lifetime
Widow's Penalty - Survivor Filing Status Transition
When the first spouse dies, the surviving spouse transitions from Married Filing Jointly to Single (or Head of Household). The same income that was well within MFJ brackets can push the survivor into higher income tax brackets, higher IRMAA tiers, and the 15% capital gains bracket -- with no income change whatsoever.
Planning Strategies
The mechanics of each planning strategy Stratum models, and how strategies interact when they run in sequence.
Annuity (Single-Premium Immediate)
Model a single-premium immediate annuity (SPIA) by routing a lump sum from a taxable, tax-deferred, or Roth account to an insurance carrier in exchange for guaranteed period-certain payouts. Tax treatment depends on the funding source: qualified (100% ordinary income), non-qualified (IRC §72 exclusion ratio splits each payout), or Roth-funded (fully tax-free cash flow).
Business Liquidation
Model a tax-optimized business sale through one-time or installment structure, capturing depreciation recapture (ordinary), capital gain (LTCG), and interest income, with proceeds reinvested in the owner's taxable account.
Business Structure Optimization
Optimize business entity type to reduce income and self-employment tax costs. S-Corporation election can save 15.3% FICA on distributions while maintaining pass-through taxation.
Deduction Bunching Strategy
Concentrate itemized deductions in alternating years by accelerating or deferring deductible expenses. Creates high-deduction years that exceed standard deduction and low-deduction years using standard deduction, reducing overall tax liability.
Roth Conversion Optimizer
Searches across hundreds of Roth conversion plans to find the bracket and IRMAA settings — independently for each life phase — that produce the lowest present value of lifetime taxes paid. Built around a framework that treats NPV of tax savings as the only defensible primary metric for evaluating a conversion.
Roth IRA Conversion Strategy
Convert Traditional IRA to Roth IRA by paying tax now at current rates to create tax-free retirement income and eliminate future RMDs. Strategic timing can reduce lifetime tax liability.
SEPP / 72(t) — Substantially Equal Periodic Payments
Model Substantially Equal Periodic Payments taken from a retirement account before age 59½ under the IRC §72(t)(2)(A)(iv) exception. Stratum does not charge the 10% early-withdrawal penalty — which is correct for SEPP clients, since SEPP distributions are penalty-exempt.
Social Security Optimization Strategy
Optimize Social Security claiming ages for client and spouse to maximize lifetime benefits. Delay claiming from 62 to 70 increases benefits ~77%, but requires analysis of break-even age, health, other income, and tax implications.
State Relocation
Model a move to a different state in a specified year. State income tax rate and exemptions (Social Security, retirement income, federal pensions) switch to the new state's rules from the relocation year forward. Captures the SALT-deduction feedback loop that partially offsets gross state-tax savings.
Stock Options Strategy (ISO and NSO)
Optimize the exercise and sale timing of employee stock options to control when income is recognized and whether gains qualify for long-term capital gains rates. ISO options can produce $0 ordinary income at exercise if qualifying conditions are met.
Strategic Contributions
Model specific annual contribution amounts across tax-advantaged accounts (401k, IRA, HSA) to reduce current-year taxes and project long-term account growth.
Structured Withdrawal Strategy
Configure withdrawal rates across account types (taxable, tax-deferred, tax-free) and retirement periods (early, mid, late) to control the tax character of retirement income year by year. Manual rules add fixed draws, each able to count toward the income target or add to it, and to name a specific cost basis on taxable accounts.
Supplemental Retirement Income Strategy
Plan supplemental income streams during retirement years to extend portfolio longevity, delay Social Security, and maintain lifestyle without excessive portfolio withdrawals.
Tax Harvesting Strategy
Realize capital gains or losses in specific years to manage the basis ratio of taxable accounts, offset other capital gains, or fill the 0% long-term capital gains bracket. Stratum honors IRS capital-gains netting rules and tracks carryforwards; it does not enforce wash-sale compliance.
Tax-Efficient Charitable Giving Strategy
Optimize charitable giving through QCDs (tax-free IRA distributions to charity), donating appreciated securities (avoid capital gains), and cash gifts. Maximize charitable impact and tax benefits.
Income
How income sources are projected, taxed, and distinguished from cash flow.
FERS Special Retirement Supplement (SRS)
The FERS Special Retirement Supplement is a bridge benefit paid to federal employees who retire before age 62. It approximates the Social Security benefit earned through federal service and ends when the retiree turns 62. Enter it as a fixed annual amount with no indexing. Stratum auto-computes the end year as the last full year before age 62 (ownerBirthYear + 61) — no manual end-year entry needed in the typical case.
Income Projection Model
Comprehensive income forecasting system projecting all income sources (wages, Social Security, investment income, asset withdrawals) across multiple years with lifecycle handling and indexing
IRA Distributions Taxation
Calculates tax treatment of IRA distributions. Traditional IRA: fully taxable as ordinary income. Roth IRA: tax-free if qualified (age 59½+ and 5-year rule). Traditional IRA with basis: pro-rata rule applies (portion tax-free). Note: Stratum does not model the 10% early withdrawal penalty — all distributions are treated as penalty-free, which is correct for clients using SEPP (72(t)), inherited IRAs, or other qualified exemptions.
Pension Income
Projects pension and defined-benefit annuity payments as ordinary income throughout retirement. All pension income is modeled as 100% taxable. Stratum does not implement the IRS Simplified Method for partial basis recovery from after-tax contributions. Federal, military, and state-government pensions can be flagged so state exemptions apply correctly when only those pension types are exempt.
Social Security Benefit Calculation
How monthly Social Security benefits are calculated based on claiming age
Assets & Accounts
Account types, basis tracking, required minimum distributions, and inherited accounts.
Asset Projection Model
Multi-year portfolio projection system tracking growth, contributions, withdrawals, and tax treatment across all account types
Inherited IRA
Models an inherited traditional IRA as a dedicated asset — tracks the balance separately from the beneficiary's own accounts, calculates required distributions under the rule that applies to that beneficiary, and deducts distributions from the balance each year. Covers the SECURE Act 10-year rule, life expectancy stretch, a surviving spouse's recalculated single life expectancy, and the 5-year rule and ghost life expectancy that apply to an estate, charity, or trust — in both the post-SECURE and pre-SECURE (death before 2020) regimes.
Required Minimum Distributions (RMDs)
IRS-mandated withdrawals from tax-deferred accounts starting at age 73+
Tax-Deferred Asset Basis Tracking
How after-tax contributions are tracked in traditional IRAs and 401(k)s
Tax-Free Asset Basis (Roth Accounts)
Why Roth IRAs and Roth 401(k)s have basis equal to account value
Taxable Asset Basis Tracking
Models the spectrum from buy-and-hold to high-turnover through a gain realization rate set by the account's basis ratio at entry
Thrift Savings Plan (TSP) Accounts
The Thrift Savings Plan (TSP) is the federal government's defined-contribution retirement plan, functionally equivalent to a 401(k). Stratum models TSP accounts as dedicated account types — TSP (Pre-Tax) and TSP (Roth) — that apply the same tax treatment as traditional and Roth 401(k) accounts respectively. The separate labels ensure reports correctly name federal employee accounts.
Deductions
Standard versus itemized, SALT caps, QBI, charitable contributions, and related limits.
Charitable Contributions Deduction
Calculates deductible charitable contributions to 501(c)(3) organizations and churches. Cash donations limited to 60% of AGI; appreciated securities limited to 30% of AGI. Must itemize to benefit. Excess contributions carry forward 5 years.
HSA Tax Benefits
Calculates tax benefits of Health Savings Account contributions. Triple tax advantage: contributions deductible (reduces AGI), investment growth tax-free, withdrawals tax-free for qualified medical expenses. 2024 limits: $4,150 individual (2024) / $4,300 (2025), $8,300 family (2024) / $8,550 (2025), plus $1,000 catch-up age 55+. Projection assumption: Stratum models HSA as a tax-free asset — all withdrawals are treated as tax-free, implying the spending is for qualified medical expenses (IRC §213(d)).
Mortgage Interest Deduction
Calculates deductible mortgage interest on primary and second home loans, subject to $750,000 acquisition debt limit ($1 million for pre-12/16/2017 loans). Interest must be paid on qualified residence debt and taxpayer must itemize to benefit.
OBBBA Bonus Senior Deduction (IRC §151(f))
A temporary additional deduction of $6,000 per qualifying individual age 65 or older, available for tax years 2025 through 2028. Unlike the existing age-65+ additional standard deduction, this bonus applies whether the taxpayer itemizes or takes the standard deduction. It phases out at higher income levels.
Qualified Business Income (QBI) Deduction
Section 199A deduction for pass-through business income (20% deduction)
Retirement Contribution Deduction
Calculates deductible retirement contributions to tax-advantaged accounts. 401(k) ($23,000 limit in 2024; $23,500 in 2025), Traditional IRA ($7,000 limit with income phaseouts), SEP IRA ($69,000 (2024) / $70,000 (2025) or 25% of compensation), SIMPLE IRA ($16,000). Above-the-line deduction reduces AGI.
SALT Deduction (State and Local Taxes)
Calculates deductible state and local taxes (state/local income tax + property tax), subject to a year-specific cap: $10,000 in 2024, $40,000 in 2025, and $40,400 in 2026 for MFJ/Single/HOH — half those amounts for Married Filing Separately. For households with MAGI above roughly $500,000 the cap shrinks by 30 cents per dollar of excess income, which creates a hidden marginal-rate band that matters for Roth conversion sizing.
Standard vs Itemized Deduction
Compares standard deduction ($30,000 for MFJ, $15,000 for Single in 2025) against total itemized deductions (SALT, mortgage interest, charitable contributions, medical expenses) to determine which reduces taxable income more. Critical decision point affecting tax planning strategies. Starting in tax year 2026, taxpayers who itemize and have income in the 37% top bracket are subject to the OBBBA Section 70101 itemized deduction haircut (IRC Section 68 restored), which reduces the net value of itemized deductions from 37 cents to 35 cents per dollar for income in that bracket.
Projection Assumptions
The assumptions behind every projection — inflation, returns, life expectancy, and bracket indexing.
Annual Inflation Rate
Expected annual rate of increase in prices over time. Used to project future costs and adjust indexed income/tax brackets. Typical range: 2-4% per year.
Annual Rate of Return
Expected annual investment return before taxes. Used to project portfolio growth over time. Typical range: 5-9% per year depending on asset allocation.
Churn Withholding Rate
Percentage of churned gains withheld from taxable accounts to model visible tax drag from portfolio turnover. Applied to realized gains (churn). Should approximate expected capital gains tax rate (0%, 15%, 20%, or 23.8%).
Federal Tax Environment
Model your directional belief about future federal tax rates. A positive shift raises every marginal bracket rate by that number of percentage points starting in the year you choose; a negative shift lowers them. Applies to ordinary income, long-term capital gains, and AMT rates. Does not affect NIIT, FICA, or additional Medicare tax.
Life Expectancy
Expected lifespan used for retirement planning calculations. Determines how long retirement savings must last. Typical conservative planning: age 90-95, though 50% chance of one spouse living to 92+.
Plan Stress Test (Monte Carlo Simulation)
Runs the full strategic plan 100 times with randomized market return sequences to show the range of plausible outcomes. Measures plan resilience to sequence-of-returns risk — the danger that bad returns early in retirement cause permanent damage even if long-run averages hold.
Retirement Age
Age at which client stops working and transitions to retirement income. Determines when wage income ends, retirement withdrawals begin, and Social Security claiming becomes available. Typical range: 62-70 years.
Retirement Withdrawal Rate
Controls how the base case draws retirement income from the portfolio. Choose Rate mode (apply a percentage to portfolio value each year) or Target Income mode (set a dollar target and let the model compute the gap after other income sources). Rate mode uses the widely-cited 4% rule as a starting point. Target Income mode fills the gap tier by tier based on a draw order you configure.
Social Security Claiming Age
Age when Social Security retirement benefits begin. Can claim as early as 62 or delay until 70. Each year of delay increases monthly benefit by ~7-8%. Independent decision from retirement age.
Tax Bracket Indexing
Automatically adjust federal tax bracket thresholds each year for inflation. Prevents bracket creep and provides more realistic long-term tax projections. Current law through 2025, uncertain after.