Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Taxes, Income, Spending
Old 01-03-2019, 07:54 AM   #1
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,689
Taxes, Income, Spending

Looking at the various posts regarding spending. Some include taxes with spending, others don't. Our taxes seem so much higher than most. 2017 taxes approx. $7800 on 52K income. VG investment income approx 12,000K but that is included in 52K. Of course, tax write offs for expenses.

Just seems unusually high to me.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-03-2019, 08:22 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 1,955
rough scribbles that is high. 52K - 24k standard deduction = 28k taxable, which would be about 3K in taxes.
Spock is offline   Reply With Quote
Old 01-03-2019, 08:34 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
Those are your 2017 and they do seem very high.

But I will guess that includes FICA, medicare, and maybe even property taxes.

What taxes are included in your $7,800 of taxes?

Generally, about half our income is income tax-free because we put most of it into 401(k) and health insurance which are not taxed. So when you say $52K of income, is that AGI or taxable income? AGI already removes a lot of income, so even AGI is a bit fishy.
LOL! is offline   Reply With Quote
Old 01-03-2019, 08:34 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 3,672
What's included in that $7800? I'm sure you include Fed tax, but what about state tax and property tax?
cathy63 is online now   Reply With Quote
Old 01-03-2019, 08:35 AM   #5
Thinks s/he gets paid by the post
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 2,479
Rianne, are you talking about total taxes? Federal, State, Social Security, property, etc.?

Because Spock is right, Federal income tax on that amount (assuming Married Filing Jointly) would be about $3,700 in 2017, and only ~$1,600 in 2018 (assuming $40K earnings and $12K qualified dividends).
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
USGrant1962 is online now   Reply With Quote
Old 01-03-2019, 12:09 PM   #6
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,689
Quote:
Originally Posted by USGrant1962 View Post
Rianne, are you talking about total taxes? Federal, State, Social Security, property, etc.?

Because Spock is right, Federal income tax on that amount (assuming Married Filing Jointly) would be about $3,700 in 2017, and only ~$1,600 in 2018 (assuming $40K earnings and $12K qualified dividends).
Let me re phrase to be more accurate:
1. Income based on qualified dividends ($12K) and Income from DH consulting ($42K) State of Illinois/Federal.
2. DH consulting does not WH and we have deductions for office space etc.
3. We chose to prepay 2018 taxes in full based on 2017 income.
BUT here's what we wrote checks for in April 2018
2017 Treasury: $6703
2017 Illinois Dept Rev: $1105
2018 Treasury $8200
2018 Illinois Dept Rev $1840
Total $17,848
I'm thinking we'll a nice refund this year. We use a CPA, always have. Does that seem totally out of whack?
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 01-03-2019, 12:20 PM   #7
Thinks s/he gets paid by the post
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 2,479
Oh, OK. So you are paying two years' taxes at once and paying self-employment tax for DH. Then the numbers generally make sense. Though I would expect 2018 to be lower than 2017 if income was the same.

I would guess you will see a refund on your 2018 FIT due to the TCJA changes.
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
USGrant1962 is online now   Reply With Quote
Old 01-03-2019, 12:58 PM   #8
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,689
Quote:
Originally Posted by USGrant1962 View Post
Oh, OK. So you are paying two years' taxes at once and paying self-employment tax for DH. Then the numbers generally make sense. Though I would expect 2018 to be lower than 2017 if income was the same.

I would guess you will see a refund on your 2018 FIT due to the TCJA changes.
But still, 2 years should be $6-$8K. Where does $17K come from?
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 01-03-2019, 01:01 PM   #9
Full time employment: Posting here.
lemming's Avatar
 
Join Date: May 2008
Posts: 597
When I posted my expenses for the year I included state and federal taxes that I paid in quarterly payments. I tried to keep my income below the amount where ss will be taxed which should make my tax liability for federal zero. State does not tax SS but does tax dividends. I hope to do the same again in 2019 then I will have to draw enough to be taxable income. I don't know why congress decided that things we used to value, home ownership, children, charity, medical self sufficiency, and moving expense to work are no longer of value to society but the changes might just make me pay off the mortgage.
On my expenses I put real estate taxes as part of my home expenses not lumped in with income taxes.
__________________
.
lemming is online now   Reply With Quote
Taxes, Income, Spending
Old 01-03-2019, 01:03 PM   #10
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,660
Taxes, Income, Spending

Quote:
Originally Posted by Rianne View Post
But still, 2 years should be $6-$8K. Where does $17K come from?


Why waste money on a CPA if he won’t explain it to you?

My guess is you have to pay both sides of FICA taxes since you are self employed.
RetireAge50 is offline   Reply With Quote
Old 01-03-2019, 01:10 PM   #11
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,689
Quote:
Originally Posted by RetireAge50 View Post
Why waste money on a CPA if he won’t explain it to you?
Because we're lazy. It's funny you say that, we'll talk about how FA rip us off then let our CPA spout numbers and we just sign the checks. And we're not that rich. Thank you for the kick in the butt.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 01-03-2019, 01:12 PM   #12
Thinks s/he gets paid by the post
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 2,479
Quote:
Originally Posted by Rianne View Post
But still, 2 years should be $6-$8K. Where does $17K come from?
Self employment tax (Social Security and Medicare) is 15.3%. So that is about $6,000 each year on $40K of consulting income. That is on top of federal and state income taxes.
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
USGrant1962 is online now   Reply With Quote
Old 01-03-2019, 05:24 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 7,865
Quote:
Originally Posted by Rianne View Post
But still, 2 years should be $6-$8K. Where does $17K come from?
I'm confused. Didn't you itemize the $17K in your own post #6 on this thread? And the numbers on those checks that you wrote came from your tax returns, so you can look at the tax returns and figure out how the totals were arrived at much better than those of us on the Internet who don't have your tax returns handy. Right?
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 01-03-2019, 07:18 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
Yep, it is clearly the FICA (SS) and Medicare tax on self-employment income.

It wouldn't hurt to pull out the tax returns and read them line-by-line and also understand what the numbers are.
LOL! is offline   Reply With Quote
Old 01-03-2019, 07:20 PM   #15
Moderator
 
Join Date: Jul 2017
Posts: 5,659
Quote:
Originally Posted by USGrant1962 View Post
Self employment tax (Social Security and Medicare) is 15.3%. So that is about $6,000 each year on $40K of consulting income. That is on top of federal and state income taxes.
Bingo!
__________________
Use it up, wear it out, make it do or do without.
MarieIG is offline   Reply With Quote
Old 01-03-2019, 09:12 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,686
Self employment tax always hurt. 1/2 gets deducted from gross income.
https://www.irs.gov/businesses/small...medicare-taxes
Helps to invest some each year on business equipment. Also have a savings plan like SEP or Solo.
target2019 is offline   Reply With Quote
Old 01-03-2019, 11:07 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,010
Quote:
Originally Posted by target2019 View Post
Self employment tax always hurt. 1/2 gets deducted from gross income.
https://www.irs.gov/businesses/small...medicare-taxes
Helps to invest some each year on business equipment. Also have a savings plan like SEP or Solo.
OP - this person has mentioned an important thing, a self employed person can open a solo-401K,
https://investor.vanguard.com/small-...01k?Link=facet

Lots of benefits to it.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 01-04-2019, 02:11 AM   #18
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 3,594
If I am not mistaken, I don't think the solo-401k will reduce the Self-Employment taxes any.

It will however reduce Federal Income tax and likely State income tax.

-gauss
gauss is offline   Reply With Quote
Old 01-04-2019, 03:58 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,686
Yes, gauss is correct. I mentioned business deductions as way to reduce consulting income. That will reduce self employment taxes.
target2019 is offline   Reply With Quote
Old 01-04-2019, 05:04 AM   #20
Full time employment: Posting here.
 
Join Date: Sep 2016
Location: Way up North
Posts: 561
Quote:
Originally Posted by gauss View Post
If I am not mistaken, I don't think the solo-401k will reduce the Self-Employment taxes any.

It will however reduce Federal Income tax and likely State income tax.

-gauss
I'm not a tax expert, but I think there are some qualifiers. If you have incorporated
as an S-corp, I believe the "employer" profit sharing contributions reduce the s-corps
profit but do not pay FICA. I know an unincorporated sole-prop pays FICA on both
profit sharing and salary deferrals. I have a solo 401K but I am not incorporated
so I don't know for sure, but I believe that's correct.

If everyone experienced FICA costs the way a self employed person does, they would
be less ambivalent about the costs of the programs. For a moderate income self-employed
person, Social Security + Medicare tax dwarf their Federal income tax.
bada bing is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2014: taxes vs spending vs saving eyeonFI FIRE and Money 24 06-23-2015 08:18 AM
Withdrawals, Taxes, and Spending Badger FIRE and Money 15 02-07-2012 04:26 AM
2008 Actual Spending and 2009 Budgeted Spending dex FIRE and Money 122 03-17-2009 02:49 PM
2008 Analysis - Spending, Taxes and Savings Culture FIRE and Money 7 02-01-2009 06:48 PM
Taxes, Taxes. Taxes mickeyd FIRE and Money 1 02-09-2008 12:18 PM

» Quick Links

 
All times are GMT -6. The time now is 03:32 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.