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What’s the maximum you can make in a year without being raised into a higher tax bracket.?
I live in Florida so I have no state income tax. Depending on how hard I work with overtime at my job I can make anywhere from 80k to 160k. Is there a good number to shoot for to avoid getting screwed on taxes. Thank you!
8 Answers
- Christin KLv 711 months agoFavorite Answer
If you want to avoid higher taxes, have more tax credits and deductions. Pre-tax retirement funds...shelters....expenses....You think the rich avoid them by keeping their incomes lower? If they did that, they wouldn't be rich. They milk the IRS for every deduction they can get--and have professional accountants who keep track of every penny.
If you're working for yourself--as a contractor or you're self-employed--the chances are you are not taking anywhere near the number of legal deductions you can use. If you have to travel for your job--or if you have to buy uniforms--or if you have any expenses for your vehicle to get to and from work--these are things you can deduct as well. If you're not sticking 10% of your income into a tax-sheltered retirement account like a Roth IRA or 401K, you're missing a huge reduction. Have a good accountant go over your returns and see what you might be missing overall.
If you earn 80K per year, you're being taxed at a rate of 22%. From 84-160K you're being taxed at 24%. The difference is pretty negligible. For two percent, you need to focus not on what you earn, but how you can reduce your liability.
- Coffee DrinkerLv 711 months ago
If you can earn anywhere from $80-$160k then the ideal number to shoot for to have the largest amount left AFTER tax is $160k. Taxes are never 100% so no matter how much you've already earned in a given year, if you earn another $1 you pay less than $1 in additional tax and have more money in your pocket than if you had never earned that $1.
I think I know what you're worried about - you are worried that if you go $1 over the limit into a new bracket your entire income will be taxed at a higher rate resulting in more tax and less take-home pay than if you had just earned a few bucks less. But taxes don't work that way. When you hit the threshold to enter a new tax bracket you only pay the higher rate on the income over that threshold.
Keep in mind that when you look up the tax tables the numbers you see are your taxable income AFTER subtracting your deduction. If you are single and don't itemize deductions then you will deduct the first $12,400 and only the rest of the money goes into the tax brackets. For example if your income is $100,000 you would deduct $12,400 leaving you with $87,600 of taxable income to put into the tax tables.
But you never move backward by going just a few dollars over the threshold into a higher tax bracket. So the sweet spot would be to work enough OT to have money to fund your desired lifestyle but still have enough time to enjoy that lifestyle.
- StephenWeinsteinLv 711 months ago
It's different each year. You can see a table of the numbers for this year at https://www.irs.gov/pub/irs-pdf/f1040es.pdf
The numbers in the table are taxable income. To find the total allowable income, you have to add your deductions to the numbers in the table.
- ?Lv 711 months ago
One penny below the bracket line. Going into a new bracket doesn't hurt you. Only the amount made over the bracket line is taxed at the higher rate, not your entire income.
- Wayne ZLv 711 months ago
Make as much as possible. You can file behind by making more money.
Only that amounts above the tax bracket begin point are tax at the higher amount.
- Anonymous11 months ago
You have the wrong attitude. My sister's late father-in-law owned a large embroidery business and was very clear he preferred HIGHER tax amounts because it means he earned more money. There are isolated cases where earning more becomes a penalty. In subsidized health insurance, in crossing an amount that can lose a deduction, or in the one dollar that moved you up the little line to the next $50. Most deductions get phased, smaller after a certain level and not a YES/NO dollar amount.
If you earn more, you pay more taxes and have higher total take-home money. The issue is actually that the tax cuts on rich people are fueling part of the anger now. Even in Covid-19 relief, certain rich people got millions of dollars.
2019 brackets are available, changing slightly for 2020, but can still be changed again.
https://taxfoundation.org/2019-tax-brackets/
In 2019, single had $12,200 standard deduction, Married Filing Jointly $24,400 and Head of Household $18,350.
Subtract that from gross
For example, suppose you gross $150,000 and single, $137,800 taxable income. $8,239.80 is maximum Social Security FICA and 1.45% for Medicare for any income $2,175. Income tax $970 + $3573 + $9840 to the 24% bracket and $137,800 - 84,200 = $53600 and 24% x 53600 = $12864
You may consider $37,662 a lot to pay in taxes, but it is really $112,338 in take-home pay that is far more than half the country struggling.
Grossing $10,000 more pays $145 medicare and $2400 in income taxes but still takes home $7455 extra. Grossing $10,000 less loses $7455 in take home. You may consider all of your gross income as your money, but the taxes help allow people to buy the goods and services that allow you to earn more. You can reduce your adjusted gross by using 401K or other tax deduction vehicles.
If you earn more, you take home more. I won't consider the small differences in just crossing a line.
- L. E. GantLv 711 months ago
Taxes are applied marginally. So, it makes little difference about which tax bracket you are in.
For illustration let's say it's 20% up to $80,000, 25% up to 120,000,30% up to 160,000 and 40% beyond 160k
If you make $80k , you pay $16,000 tax
at 90k, you pay $16,000 plus 25% of $10k = 16,000 + 2,500 = 18,500
at 120k you pay $16,000 plus 25% of $40k = 16,000 + 10,000 = 26,000
and so on.
The "nice" thing is that, if you know how to play the tax system (or have a good tax accountant), you can pay less of that extra tax the more you make.