Is there a formula for this?

[smooch]

I am trying to figure out how much earned income we need to gross to have a net income of 55k. I want to see, if we don't touch our savings, but stop adding to them now, how much do we need to earn to cover our expenses. I tried using the federal and state tax booklets from last year and filling them out as if our gross was 70K. This is probably pretty simple math. Is there a formula to figure this out?

 

[wabmester]

No, you're not going to find a simple formula. Too many variables and it's not a continuous function (due to multiple tax brackets).

But, you can play with this marginal -> effective tax calculator to find the answer for your situation:

http://www.dinkytown.net/java/TaxMargin.html

 

[retire@40]

I am trying to figure out how much earned income we need to gross to have a net income of 55k. I want to see, if we don't touch our savings, but stop adding to them now, how much do we need to earn to cover our expenses. I tried using the federal and state tax booklets from last year and filling them out as if our gross was 70K. This is probably pretty simple math. Is there a formula to figure this out?

It is simple math, and here is the formula:

Gross Income = Net Income + Federal Income Tax + Social Security Tax + Medicare Tax + State Income Tax (if any) + Local Income Tax (if any)

I guess E=MC2 is simple math too, now that I think about it.

 

[Gone4Good]

As Wab said, there are too many variables for a simple formula, especially if you itemize deductions or some of the deductions phase out. However, it's not too hard to set up the federal and state tax brackets in Excel, estimate your federal and state deductions / exemptions, and calculate your take home pay at any assumed level of income. Also don't forget Social Security & Medicare tax - they take a pretty big bite too.

 

[burch64]

I use 21.25% deduction in my gross. I came up with this by trial and error, yours is probably different.

Burch64

 

[smooch]

Thank you all. That formula is pretty much what I did. I'll try the 21.25% also to see if I come up with about the same figure.

 

[AltaRed]

Tax software will allow you to do a lot of 'what ifs' as well. Is usually how I do that kind of analysis.

 

[retire@40]

If you only had social security and medicare tax and you are under the maximum social security tax, you could use the following formula:

Gross Wages = Net Wages / 0.9235

Once you know what your total other taxes are (fed, state, local), you can factor those into the equation and adjust the divisor.

 

[justin]

Remember that you only need a ballpark estimate of the taxes you'll pay based on today's tax rates and taxation structure. You can pretty much count on the rates and/or structure of our taxation system being different in the future. You could get an exact amount of income you'd need to pay your expenses and the taxes, but when the tax rates or structure changes, you're necessary gross income will change too.