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It’s possible to pay $150 in taxes on an income of $150K

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Re: It’s possible to pay $150 in taxes on an income of $150K

#81

Post by walshemj »

andrejguran wrote: post #73
hiram112 wrote: post #67

For any of our friends outside the US, this is not normal. As someone with a similar income (single - not married couple) but 0 children, 0 "special" government deductions, etc, here's a breakdown of my 2020 numbers: - Income from employer: $168K - Investment income: $41K - Total income: $209K Deductions (rounded numbers): - $19.5K (private retirement 401k) - $12.5K standard deduction - $3.5K health care savings - $3…

on $209k salary or £148k, here in UK the total tax is £46,632 and £6,838 for National Insurance. So about 36% which is almost the same as California. Source: https://www.thesalarycalculator.co.uk/salary.php

Might be lower when you factor in Pension and ISA - and that's not counting and approved share schemes, VCT EIS and SIS.

Re: It’s possible to pay $150 in taxes on an income of $150K

#83

Post by lostcolony »

rejectedandsad wrote: post #58
lostcolony wrote: post #46

Earlier quoted context omitted.

Why? Tax brackets are progressive, so even if you had moved up a bracket it wouldn't change the fact you're still making more money (i.e., you don't suddenly go from paying 24% to 32%; you just pay 32% of the money made above the 24% bracket). And given the 2021 brackets, if you're single, you haven't even moved up a bracket ($86,376-$164,925 is the 24% bracket), but even if it had, your effective tax rate barely cha…

I’ve never been able to contribute to an IRA. But realistically for me the only change is I’ll owe instead of getting a refund on account of the withholding. Considering I don’t keep much in cash I’ll need to make some changes in a year.

Why will you owe instead of getting a refund? What has changed this year? Are you a 1099 and you didn't contribute enough? Because if you're a W2, and you haven't changed any of your amount withheld, you're just making more, and you got a refund last year, and it's the same employer...I'd be shocked if you ended up owing.

Even if you changed employers, it's unlikely you'll end up owing (at least, not much); while the new employer won't know what bracket to start withholding from, the extra amount you'll be paying into social security is an extra 6% that will likely cover much of it.

Re: It’s possible to pay $150 in taxes on an income of $150K

#84

Post by tingletech »

SavantIdiot wrote: post #13

The two biggest reducers he cites are 401k contributions and tax-loss harvesting. #1. 401k. While this is a great idea, if he's trying to retire at 33, putting 17.5k away from his 70k paycheck is not going to help because he can't touch it until he is 59.5 (w/o penalty). #2. Capital losses Tax-loss harvesting means selling securities that are underwater to get a capital-loss deduction. I don't know where to start exp…

he had a 457 in 2013 when he wrote this. You can draw from that as long as you are no longer working for whoever you had the 457 with.

Re: It’s possible to pay $150 in taxes on an income of $150K

#85

Post by tingletech »

SavantIdiot wrote: post #53
stu2b50 wrote: post #28

Earlier quoted context omitted.

>because he can't touch it until he is 59.5 (w/o penalty). That's not quite true. With 5 years of preplanning, you can get money out of a 401k without any penalty at any age (although, you will of course pay taxes on it) by doing a backdoor Roth IRA ladder.

I've not heard of that. So it goes from one IRA into another? Why? Plus, ROTHs have yearly limits of $6k. While it can be done I don't see the benefit of doing it, esp. given the tiny amounts (compared to what is needed for retirement).

$6000 is the annual limit for contributions

There is no limit for conversions. See also back door roth and mega back door roth.

Re: It’s possible to pay $150 in taxes on an income of $150K

#86

Post by tingletech »

walshemj wrote: post #76
bingidingi wrote: post #23

Holy shit, $500 a year for health insurance? I pay twice that a month and don't even get an HSA option. Seems weird to put so much into retirement funds if your plan is to retire in your 30s, the penalties of touching that before 60 are pretty substantial. I suspect there's some sort of inheritance of property or something they're not disclosing.

The author is a federal employee which does help a lot

if the author were a federal employee, they would have a thrift savings plan; not a 401k and a 457. I'm surprised they have a 401k vs a 403b.

Re: It’s possible to pay $150 in taxes on an income of $150K

#89

Post by andrewmcwatters »

Swizec wrote: post #60
andrewmcwatters wrote: post #54

Earlier quoted context omitted.

You can’t just form an LLC and start writing off your home furnishings as a “business expense” because you make $5 a month from a browser extension that some people donate to your Paypal account. That’s tax fraud. That’s literally what that is. It’s incredible that anyone would think otherwise.

Yes it’s generally frowned upon to have more business expenses than revenue for multiple years in a row. But claiming your home office (a part of your home explicitly used for work) as a business expense is definitely not tax fraud. You can’t claim your kitchen tho.

Yeah, the IRS makes it pretty clear what the "Business Use of Home" is, and it's not your bedroom.

Re: It’s possible to pay $150 in taxes on an income of $150K

#90

Post by andrewmcwatters »

lukevp wrote: post #52
andrewmcwatters wrote: post #36

I’m always amazed that people think 401(k)s are a great idea. Yeah, that’s exactly what I want, the government telling me how I can spend my money, until I’m almost ready to die, with no guarantee the laws governing 401(k)s won’t change along the way, or that some moron politician won’t siphon from my retirement.

401(k)s are privately managed. They were originally designed as a technique to replace pensions, and are separate from government-mandated savings like Social Security. How would a politician siphon from your retirement? A 401(k) is basically just an IRA that a company manages for you and pays someone to administer so that the deferred tax burden can happen. Or do you mean that in the future, taxes may go up? If that…

There's actually nothing in the United States Code that specifies whether or not "Cash or deferred arrangements" (U.S. Code § 401, subsection (k), or "401(k)"), is privately managed. A 401(k) can be a publicly managed pension! A 401(k) is a type of pension. A 401(k) agreement can straight up be cash payments!

> (A) [...] a covered employee may elect to have the employer make payments as contributions to a trust under the plan on behalf of the employee, or to the employee directly in cash;

It's just that no one does that. That trust that is mentioned is the stock portfolio approach that nearly every organization uses.

> How would a politician siphon from your retirement?

I guess you weren't listening to political discourse for the last 8 years, you know, where politicians repeatedly suggested that we add additional taxes specifically to 401(k) trusts, annually, as another form of expense ratio.

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