Post: #1

Currently, I am making 45k in a southern state.

Here is the Singles Tax bracket for 2014:



So, right now I will be in 25% tax bracket, but I noticed that I can contribute more to my 401k and get under 36k easily.

This looks like a pretty good idea: I won't be giving an extra 2-5k to the IRS and essentially giving myself a 5% raise. (Is my logic correct here?)

I plan on making more money in the next few years. I noticed that this strategy will not work passed 50k anual earnings because you can only invest $17,500 into a 401k, as of 2014.This will not get you to that sweet 36k.

Are there other ways to lower your tax bracket besides getting married, having kids, buying property?

I am going to enroll in my employers health care, but I do not think that will make a large enough dent when I am pulling 60k+.

I also figured out that Traditional IRAs and 401k do not stack when taking away from your gross income.

Anyone have suggestions/methods to reduce gross income to continue to be in the 15% tax bracket vs 25%. I would also like input on if this is a solid idea - I will have to live a minimalist lifestyle because of this.

Post: #2

Read the chart again closely. These are called marginal tax brackets. It is only the income above 36900 that is taxed at 25%. If you can't save enough to bring you down to the 15% bracket it is OK. There will not a big tax break for achieving the lower tax bracket vs getting close but not quite making it.

Post: #3

Here is the math I was using:

15% tax bracket:
36,900 - 9,075 = 27,825 * 0.15 = 4,173.75 + 907.5 = 5,081.25

Total taxes: about 5k

25% tax bracket:
45,000 - 36,000 = 8,100 * 0.25 = 2,025 + 5,081.25 = 7,106.25

Total taxes: about 7k

Post: #4

(08-02-2014 08:57 PM)Moreless Wrote:  Here is the math I was using:

15% tax bracket:
36,900 - 9,075 = 27,825 * 0.15 = 4,173.75 + 907.5 = 5,081.25

Total taxes: about 5k

25% tax bracket:
45,000 - 36,000 = 8,100 * 0.25 = 2,025 + 5,081.25 = 7,106.25

Total taxes: about 7k

Moreless,

DON'T FORGET to factor in your standard deduction and personal exemption when figuring taxes.

Post: #5

(08-02-2014 09:12 PM)TheSearcher Wrote:  

(08-02-2014 08:57 PM)Moreless Wrote:  Here is the math I was using:

15% tax bracket:
36,900 - 9,075 = 27,825 * 0.15 = 4,173.75 + 907.5 = 5,081.25

Total taxes: about 5k

25% tax bracket:
45,000 - 36,000 = 8,100 * 0.25 = 2,025 + 5,081.25 = 7,106.25

Total taxes: about 7k

Moreless,

DON'T FORGET to factor in your standard deduction and personal exemption when figuring taxes.

So i had to do some research on what you were talking about and found a video about Standard Deductions: https://www.youtube.com/watch?v=p2pUU7snhag

This video shows that you automatically get $6.1k deduction from your gross income if you are single in 2013. This should be $6.2k for 2014.

Lowering me from $45K to $38,800 gross... but wait..

The Personal Exemption will be $3,950 deduction if I am claim myself as a dependent for 2014.

That would lower my gross from $38,800 to $34,850 putting me in the 15% tax bracket.

This combined with my 401k and health care should get me to the 15% tax bracket for sure.

Please let me know if I am wrong, I am a total newb when it comes to this and don't have mentors to show me the way!

I do appreciate the replies, keep them coming.

Post: #6

Turbotax has a free tax estimator, that you can use to do the tax planning you are thinking through https://turbotax.intuit.com/tax-tools/ca...taxcaster/

Post: #7

Consider a Roth 401k too if you are trying to defer more money from taxes but bumping up against 17k limit

After all, 17k of after tax money is more than 17k of before tax. Also, Roth 401k has some benefits after you roll over to Roth IRA, such as being able to withdraw principal penalty free