Where are the tax breaks for people making 200k/year

[Sue J]

A few years ago I has a conversation with a sister-in-law. Our kids were coming up on college and hers were a few years behind. I mentioned the wonderful college tuition credits that would help offset our costs and she said their family wasn't eligible for those, they made too much! I had to look up the income cutoff levels for those. I knew they were doing well, just didn't know how well.

They weren't even eligible for the next best college tax benefit, the tuition and fees credit on Line 34. Good for them to have a high income. They may make a lot, but they spend a lot and owe a lot, too.

[jetpack]

Self employed individual here: ($220k from business + $130k from investments) = $350k Gross, $280k net after maxing out contributions & deductions.
$82k in fed taxes. I'm sure I could pay a lot less by spending more, I'd rather keep things
simple... Also concentrate on longer term investments with less taxable income.

[nash031]

I guess we're lucky in that DW and I gross well over $200k, but our taxable is under $150k and our MAGI is less than that. Combination of 403(b)/TSP contributions, mortgage interest, and a few other smaller itemized deductions... BIG part of it I have to consider after my military time is over is that a good chunk of entitlements are in the form of non-taxable "allowances." Many separated military people don't understand how much their salary needs to increase to compensate for the tax benefit we receive.

[FIREd]

We get a few tax breaks: pre-tax health insurance, FSA, pre-tax transit, pre-tax life and disability insurance, DW's 401K, munis, MLPs, I-bonds, backdoor Roth IRA, qualified dividends, foreign tax credit, etc...

[robnplunder]

Quote:

Originally Posted by Sue J A few years ago I has a conversation with a sister-in-law. Our kids were coming up on college and hers were a few years behind. I mentioned the wonderful college tuition credits that would help offset our costs and she said their family wasn't eligible for those, they made too much! I had to look up the income cutoff levels for those. I knew they were doing well, just didn't know how well. They weren't even eligible for the next best college tax benefit, the tuition and fees credit on Line 34. Good for them to have a high income. They may make a lot, but they spend a lot and owe a lot, too.

At your SIL's income level, donations, property tax & mortgage interest are probably the only major items which can be deducted. Most other deductions fall off the list.

[someguy]

I've seen the opposite -- I'm getting applications from current or recent ex military guys looking for 30%+ above the average salary for the position because they are grossing up to compensate for losing the tax benefits.

Quote:

Originally Posted by nash031 BIG part of it I have to consider after my military time is over is that a good chunk of entitlements are in the form of non-taxable "allowances." Many separated military people don't understand how much their salary needs to increase to compensate for the tax benefit we receive.

[phil1ben]

The phase-out of itemized deductions is called the Pease Rule. Named after the Congressman who first introduced it.......

Generally, your itemized deductions are reduced by a sum equal to 3.0% multiplied by the amount that your AGI exceeds $300,000.00 (married filing joint) not to exceed 20% of your deductions.

Example: Your AGI is $1,000,000 above the Pease threshold and your unprotected itemized deductions add up to $32,000. The 3% rule would reduce these deductions by $30,000, leaving you with only $2,000. Because of the 80% rule, you can deduct $6,400 (20% of $32,000).

That is why many high income earners do not have a mortgage.

[razztazz]

Quote:

Originally Posted by Sue J Good for them to have a high income. They may make a lot, but they spend a lot and owe a lot, too.

Sounds like a management problem

[razztazz]

Quote:

Congrats friend, you are now a member of the rich.

Here's part of the problem. Piker. The "Top 1%"er likes to think he/she's a Somebody but the reality is they are still normal people. Highly paid ones but nothing special. The real money, the real Somebodies are as far over their head as they are my head. You couldn't live on the difference.

As a single person even making peanuts many years ago, I know what it's like to always get f''ked over wrt taxes and having nowhere to run. I'd always ask myself : Would I like to have the bigger money and get stuck with bigger taxes? Or would I prefer to have things like they were 5, 10, 20 yrs ago? ie Nice low, "F''k The Man" tax rates and far less take home pay? Or maybe this is just the bushllit "poor people" tell themselves?

Personally I think I am entitled to what everybody else has. Poor people, rich people, everybody. You name it.

[Fermion]

Quote:

Originally Posted by razztazz Here's part of the problem. Piker. The "Top 1%"er likes to think he/she's a Somebody but the reality is they are still normal people. Highly paid ones but nothing special. The real money, the real Somebodies are as far over their head as they are my head. You couldn't live on the difference. As a single person even making peanuts many years ago, I know what it's like to always get f''ked over wrt taxes and having nowhere to run. I'd always ask myself : Would I like to have the bigger money and get stuck with bigger taxes? Or would I prefer to have things like they were 5, 10, 20 yrs ago? ie Nice low, "F''k The Man" tax rates and far less take home pay? Or maybe this is just the bushllit "poor people" tell themselves? Personally I think I am entitled to what everybody else has. Poor people, rich people, everybody. You name it.

The stick in the eye is the Roth IRA. Everyone should be able to contribute directly to a Roth IRA regardless of income without having to play backdoor fun games. It is quite easy for someone to have high income along with high expenses in a high cost of living area and be above the contribution thresholds without actually having that much more saving.

I am not going to play the ultimate game. The government told me what they wanted the split to be, I say no, and we both will now get nothing during my early retirement. (actually the government will have to pay me a bit)

[retire2020]

Quote:

Originally Posted by gauss Have you researched a Backdoor Roth IRA yet? This 2-step method should be available at your income level. Just make sure that you understand the tax implications of the Pro-Rata rules before you actually convert to the Roth. There is lots of info in the forums and the web in general on this strategy as it is available to almost everyone. Another option to seriously look into is if either of your 401k plans will allow "after-tax" contributions. Most 401ks only allow pre-tax or Roth contributions up to to the elective deferral limit of $17,500. If you are fortunate enough to have a plan that allows "after-tax" contributions you can save up to the "defined contribution" limit of $52,000 yearly. The beauty of this setup is that these after-tax contributions can then be converted to a Roth IRA. Oh, and by the way, congratulations on your promotion. When looking at investment options be sure not to let the tax tail wag-the-dog. When we were dual income I didn't like the high tax numbers but I did like the high after tax income. It made me even more motivated to attain ER when the tax bills would go way down. -gauss

Thanks Gauss…I was not aware of this. I just spoke with my company and they allow it. Can I convert that to roth IRA right away or will have to wait for some time? If it allows it right away then my tax implications will be just nil.

[Travelwanted]

1-I invested in a land trust. That helped a lot. Do your research first as they are complex.

2-I purchased film tax credits. Available here not sure if they are available in other states.

Still paid >30% tax rate. Ugh!

[pb4uski]

Back when I was working we were a high income Megacorp family (all W-2 earnings). Other than maxing our 401k/HSA etc. there isn't much you can do other than pay through the nose.

[Travelwanted]

I am not going to play the ultimate game. The government told me what they wanted the split to be, I say no, and we both will now get nothing during my early retirement. (actually the government will have to pay me a bit)[/QUOTE]


Couldn't agree more! I have paid MORE than "my fair share". Looking forward to lower tax brackets ahead.

[haha]

Quote:

Originally Posted by LOL! Here are the tax breaks clearly laid out: Bogleheads • View topic - Taxes on a family with $200,000 gross income

"I'll start with this example.

Married couple, both age 50. Two kids ages 15 and 18.

Wife makes $168,000
Husband makes $22,000 "

With that much income disparity, I would hate to see his Honey-Do list.

Ha

[Fermion]

Quote:

Originally Posted by haha "I'll start with this example. Married couple, both age 50. Two kids ages 15 and 18. Wife makes $168,000 Husband makes $22,000 " With that much income disparity, I would hate to see his Honey-Do list. Ha

It is quite long I am sure. My wife makes $257,000 and I make $0.

[M Paquette]

Quote:

Originally Posted by Fermion 200K isn't even remotely rich. It is probably considered poor in NYC.

Ditto San Francisco, home of the million dollar one bedroom condo. Of course, there aren't a whole lot of middle class folks living in much of Manhattan or San Francisco. Thats what Queens and Oakland are for...

(Huge issue in SF right now, with members of the Protester Class getting all riled up over rising rents. They're protesting this almost as much as new construction...)

[haha]

Quote:

Originally Posted by M Paquette (Huge issue in SF right now, with members of the Protester Class getting all riled up over rising rents. They're protesting this almost as much as new construction...)

A very careful local RE consulting firm did a big study that showed, yes occupiers, new apartment construction does lower rents. Supply and demand is not a 1% trick. The braying class including our first avowedly socialist council member will have none of these conclusions. True, these new buildings have higher rents, but buildings only a few years older in the same area are much cheaper.

Seattle still has many cheap neighborhoods. The protestors don't want these, they want the closest in, most hip neighborhoods, at prices of 10 years ago. Some of them also want preferential treatment of certain groups.

Ha

[haha]

Quote:

Originally Posted by calmloki Consider the lucrative world of tax loss harvesting! A number of years ago we made a very bad loan - when we finally decided it wasn't worth chasing after we declared it a loss and had been able to write off $3000 of that loss each year thereafter! Last year we sold a rental and showed a honking great profit but were able to write off the remaining loan loss against the profit! Score! We only wrote IRS and state checks for a silly amount rather than a gobsmacked amount! Now I punctuate with only exclamation points because it makes me feel better about our taxes! (really, I'd rather have money and pay taxes on it than not have money and pay no taxes) (first world problem)

Also, your loss was not imaginary, you lost money to save on taxes, overall not a good trade, though reasonable enough once the money is gone.

Ha

[calmloki]

Quote:

Originally Posted by haha Also, your loss was not imaginary, you lost money to save on taxes, overall not a good trade, though reasonable enough once the money is gone. Ha

Oh we didn't plan on losing the money, and were real sure what we lost was real. Sort of glad to finally be able to write off the loss against profit. The money we didn't have to pay in taxes is pretty real as well. Nice of Unca Sam to forgo that tax money as a consolation prize for our loss years ago.