EDIT: Updated as I put the HSA on the wrong line. HSA contributions are not exposed to payroll tax.
What is this saver's credit witchcraft? I'm also entranced by this ability to contribute to a traditional IRA and be able to deduct that from your tax liability, as I'm single and not accustomed to seeing income levels like this while having tax deductibility for IRAs. So help me out, is this a plausible scenario for a married couple?
$98,474 Gross
- $6650 HSA
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$91,824 exposed to payroll taxes
- $7025 SS & Medicare
- $18,000 401k (husband)
- $5500 IRA (husband)
- $18,000 401k (wife)
- $5500 IRA (wife)
- $1800 (HDHP, dental, vision insurance)
---------
$35,999 AGI
- $12,600 Std. Deduction
- $ 8,000 Exemptions
---------
$15,400 Taxable Income
For MFJ, this is in the 10% bracket so:
$ 1,540 Tax
- $ 1,540 Savers' Credit
---------
$0 Payment due IRS
Is this plausible? I'm not saying I'm mad, but does our tax law really permit gross income up to nearly $100k while paying zero in federal income tax (aside from the $7025 of payroll tax)? This makes early retirement look ridiculously easy for married high earners. I mean we're talking almost a hundred grand and no federal income tax. Someone tell me if this is accurate or not. I have trouble believing this is possible.