New Tax Bracket & Need Some Ideas

[ComingInHotParticipant 160]

I am going to be in a new tax bracket for 2015 of  $37,451- $90,750.    I make $20.50 an hour and overtime is mandatory during the busy season.  Now, this new tax bracket is making me liable for $5,561 + 25% over $37,450.  $5,561 plus 25%  is mind boggling.

Is there anyway I can lower my tax burden legally.

I know a little about deductions via taxes, like for work tools, student loan interest etc, so I should be good there.

I was thinking of contributing to a 401k at work to try to keep my taxable income below $37,450.  Is there anything that I can do to lower that amount via deductions on my paycheck besides 401K?

Any suggestions would be helpful fellow mgtow’s.

I feel like being a single guy and not married I am being punished, I feel like Im getting raped with no lube by uncle sam.

 

 

[lowrollerParticipant 7]

Uncle sam will rape your asshole. .

[33wolfmanParticipant 216]

Charitable deduction?

[MadmanParticipant 772]

I would Max out the 401K to the limit (18,000$) if you can afford it. Otherwise I would at least contribute to get the company match if there is one.
Think about starting a Traditional IRA as well, the money you put there is tax deductible also, but there are limitations on IRAs depending on how much your income is for the year. If you make too much money only part of the IRA contributions will be tax free, and if you make even more money you cant deduct anything from an IRA. Later down the road you can convert your 401k and Traditional IRA to Roth IRA and never pay taxes on that money ever.
You can also start a taxable investment account and put some of your take home pay into that and begin earning dividends which in a taxable account you can reinvest them or cash them out if desired.

http://www.madfientist.com

[MadmanParticipant 772]

This is taken right from the Mad Fientist website.

Triple Value of Income

My friends and family know I’m frugal but recently I was told by my ever-concerned mother that, “watching what you spend is fine but sometimes you just have to buy something nice for yourself without stressing out about it.” While I do agree with this to an extent, the comment made me think about why I never like spending money.
I’ve come to realize the part of my personality that makes me seek out the best deal for everything I buy is the same part that causes me to be uncomfortable every time I spend any money. The very act of spending the money means that I’m not getting the biggest bang for my buck. I’ll explain…
Spending
When I make a dollar at work, there are many things I can do with that dollar that will determine how valuable it actually is to me. If I decide to take that dollar out of my paycheck so that I can spend it, I am getting $0.80 of value out of that dollar because of my effective tax rate of 20%.
I worked hard for 40 hours this week but if I use my entire paycheck for spending I would be losing an entire day’s work worth of value from what I earned! I don’t know about you but I don’t want to work for free for a day a week just so I can buy things I don’t need.
Investing
If I instead put that dollar into a diversified stock portfolio, I am still initially losing that $0.20, because I am still paying income tax, but at least now it has the ability to recoup some of that lost value over time. Leaving that $0.80 invested for 10 years, earning the 7% average stock market real rate of return (i.e. after inflation), the dollar will grow to $1.57, which will provide me with $1.45 of value (assuming a 15% capital gains tax).
Retirement Contributions
If I go a step further and contribute that dollar to my 401k or IRA, I am bypassing the income tax initially, therefore putting the full value of my dollar to work. Assuming I begin withdrawing from my retirement account in 30 years, the value of the dollar I put into the account will be $6.70 (again assuming an average 7% return, after inflation, and a 12% effective tax rate at withdrawal).
Employer Match
What if my employer offered a retirement match program? If I contribute a dollar and my employer matches me, I am initially getting a whopping $2 worth of value! Who wouldn’t love a 100% raise? Again assuming, I leave those two dollars invested for 30 years, I would eventually receive $13.39 in value from that single dollar!
Investment Income
Okay, getting double the value of my dollar is really exciting and investing that $2 and growing it to $13.39 by the time I am 60 is even more exciting but who says I have to spend that dollar when I turn 60? What if I leave that money invested and instead spend the interest/dividends I am earning on that money. That dollar that would have only been worth $0.80 had I spent it when I earned it is now providing me over $0.80 every two years (assuming a 3.5% yield)!
It may not seem like a big deal when we focus on the value of a single dollar, but if we expand what has been discussed to larger numbers, you can see how these ideas can really supercharge your FI savings. By maximizing the value of the dollars you earn, you can give yourself a huge raise without incurring any more responsibilities or working any additional hours.
Example
Let’s assume you make $100,000 a year. If you spend everything you earn, your take-home value at the end of the year is roughly $80,000. If you instead put the majority of your income into your retirement, HSA, and investment accounts, you end up getting $263,663 of value out of that salary!
•Matched Retirement Contribution (5%): $5,000 * $13.39 = $66,950
•Retirement Contribution Unmatched: $12,000 * $6.70 = $80,400
•HSA Contribution: $3,100 * $6.70 = $20,770
•Invest: $48,650 * $1.45 = $70,543
•Spend: $31,250 * $0.80 = $25,000
$66,950 + $80,400 + $20,770 + $70,543 + $25,000 = $263,663
Increased Value
By limiting your spending and maximizing your tax-advantaged allowances, you are getting over $263,663 in value out of your $100,000 salary. In order to get $263,663 of value out of a salary in which all proceeds are spent, you would need to make $366,199 a year ($366,199 minus 28% tax)!
Calculator
I’ve created a calculator so that you can plug in your own numbers to see some figures that pertain to your situation. Try it out and see how much of a raise you can give yourself by being more intelligent with what you do with the money you earn.
I know my mom just wants me to be happy and treat myself every once in a while but I hope she can see that I am not depriving myself of enjoyment now just because I am a cheapskate. I am just putting off spending my dollar today so that dollar can grow into something that will provide me income and enjoyment for the rest of my life.

[ComingInHotParticipant 160]

Wolf & Madman,

Thank you for those insights I am going to utilize them 100%.  Charitable deductions is something I didn’t even think of.  Madman, that link and post was great thank you man, much appreciated.

Thanks again gentlemen.  +1 for you both for that outstanding advice.

[KeymasterKeymaster]

Congrats on your leap.

Maybe open a business. Costs about $800 a year to be incorporated. The benefits are many, but YOU MAY be able to work with your employer and get them tho pay YOUR COMPANY for a month (or two) out of 12. Perhaps for overtime, or maybe you will do some extra work for them as a business owner and contractor.

This way you have a chunk of change you can use to pay business expenses – like a new computer for instances.
You can give 40% to uncle Sam, or your business can get a new computer.

Have your own business on the side also PUTS YOU IN BUSINESS as you’re building it and collecting a check as an employee elsewhere. Since something like 90% of businesses fail in the first 18 months, you can keep your job for 3 / 4/ 5 years at which time you will be able to devote more time to it…. and buy then, you have “already been in business for 5 years’.

Additionally, “having your own business” also means, you’re CEO and the boss – which feels great. But it feels even better to tell an HR c~~~ that you don’t have to give anyone “references” because you’re at the TOP of the pyramid and you only report to you. This way you can be a hot shot CEO, and not have to cow tow these corporate bitches. They can hire you based on SKILLs and EXPERIENCE instead of what other people have to say about you.

You don’t have to be very creative to easily knock off $5K in taxes next year.
Established a business – even a non profitable one – costs money.

AND…. you can put MUCH more away per year as a business owner than just $5500 max IRA contribution.

It doesn’t matter what you make…
What matters is what you SAVE and have left at the end of the year.

Pay yourself first. ALL THE TIME.

BIG success to you.

If you keep doing what you've always done... you're gonna keep getting what you always got.

[ComingInHotParticipant 160]

Thanks for the advice Keymaster, much appreciated and will def look into everything you listed, thanks for taking the time to reply and help me out.  Thanks again man.

[Cipher HighwindParticipant 1144]

The game is “Guess Cipher’s Tax Rate”. The winner gets a prize equivalent to his monthly income multiplied by said tax rate. The loser is penalised similarly.

A) 0%

B) 0%

C) 0%

[MadmanParticipant 772]

Nice Tax rate Cipher. Are you a Mad Fientist or Go Curry Cracker reader as well?

I cant wait to retire early and start paying zero taxes. Are you doing the Roth IRA conversion ladder also?

 

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