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TAc bracket
Old 02-07-2005, 07:58 PM   #1
 
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TAc bracket

I am not sure if I can lower my tax bracket anymore- currently I make 31k and have 6% taken for 401k. How would I check to see if I can get to a lower tax bracket?
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Re: TAc bracket
Old 02-07-2005, 08:12 PM   #2
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Re: TAc bracket

It is a common misunderstanding to think one is in a certain tax bracket. There are marginal tax rates that kick into effect when you pass a certain amount of realized income. Just pulling this out of thin air, but it works like this: Up to say, $20K you're taxed at 15%, for monies past 20K to 31K you're taxed at 28%, and so on and so forth. The actual points i have no idea.

So.... there's no fine line where you can go from 28% rate on everything to 15% rate on everything as often is misunderstood. So dont sweat it, just get your realized income as low as possible.
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Re: TAc bracket
Old 02-07-2005, 09:00 PM   #3
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Re: TAc bracket

The 2005 tax rate breakdown is as follows,


upto ................ $7,300 = 10%
from ..$7,300 to $29,700 = 15%
from $29,700 to $71,950 = 25%

MJ
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Re: TAc bracket
Old 02-07-2005, 09:13 PM   #4
 
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Re: TAc bracket

I just went through this as I was doing my taxes. Look at your taxable income ('adjusted gross income = income - exemptions and deductions). If you can plan ahead it's great to keep your taxable income under 29,050 (single). For every dollar after that, the rate jumps to 25%. Note that the rates flatten out after that big 10% jump.

Qualified corporate dividends and long term capital gains are taxed at:
15% for taxpayers in the 25% bracket and up.
5% for the taxpayers in the 10% and 15% brackets.

I try to optimize my bond allocation so that my taxible bonds and interest don't push me into a high bracket. Then, the munis kick in (since the spread only works in my favor if I'm in a higher 'bracket').

Bush has been very very good to me.


Single:
Rates Taxable Income up to
10% $7,150.00
15% $29,050.00
25% $70,350.00
28% $146,750.00
33% $319,101.00
35%

Married Joint Return:
Rates Taxable Income up to
10% $14,300
15% $58,100
25% $117,250
28% $178,650
33% $319,100
35%

Head of Household
Rates Taxable Income up to
10% $10,200
15% $38,900
25% $1000,500
28% $162,700
33% $319,100
35%
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Re: TAc bracket
Old 02-08-2005, 03:14 AM   #5
 
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Re: TAc bracket

I have posted this before, but since it is tax season.......

I mailed my returns yesterday. Paid -0- for 3 years running (federal and state). I have complete control over how much income I take and make sure I stay
"under the radar". Right now it's mainly my very low
income along with a working spouse that allows this. When DW
retires and SS kicks in we'll have a new situation.
For now though it's quite a pleasant feeling.

JG
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Re: TAc bracket
Old 02-08-2005, 04:09 AM   #6
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Re: TAc bracket

thx MJ on those figures

I overpayed by $1728. *I tend to overshoot some because i never know when i'm going to have to dump a taxable fund for monies; say to buy a car or somethin which could generate a lot of taxes due.

It would bother me to no end to have to pay a penalty cause i didnt pay at least 90% or to be forced to file vouchers once per quarter.

I know they say its like giving the gov. a tax free loan too, but still its also like pain-free money that i get once a year and i usually dump the excess in a Roth.
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Re: TAc bracket
Old 02-08-2005, 05:16 AM   #7
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Re: TAc bracket

I have to put a $19K check in the mail on April 14th.

Salary and ESOP income boosted me into the realm of deduction phase-out and I had a fair amount of dividend and rental income (so there's also AMT.) Lost the IRA deduction, lost the child tax credit.

It's a good problem to have, but I hate to think of the other uses I could put that $19K to. Like: my daughter's college fund.

This time next year I hope to be in the same territory as Mr. Galt...meanwhile, it's off to the salt mines until September.

Ed
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Re: TAc bracket
Old 02-08-2005, 08:14 AM   #8
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Re: TAc bracket

For single in 2005

15% bracket ends at $29,700
personal exemption is $3,200
standard deduction is $5000
income after $37,900 taxed at 25%

Your income $31,000 minus $8,200 = $22,800 minus 6% for 401K = $21,432 taxable.
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Re: TAc bracket
Old 02-08-2005, 10:16 AM   #9
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Re: TAc bracket

Quote:
Qualified corporate dividend and long term capital gains are taxed at 15%.
I thought that if you were in the 15% or lower tax bracket to begin with, they are taxed at 5%?
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Re: TAc bracket
Old 02-08-2005, 12:48 PM   #10
 
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Re: TAc bracket

Thanks retire@40, your're right, I'll update my post to avoid confusion. retired@38
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