75% Deferral to 401K

[Cheddar Stacker]

Not totally badass since this is on my wife's small part-time salary, but still a 75% deferral that I setup last night.

I am the majority breadwinner and max out at $17,500, but wages are too high for TIRA's since we are both covered employees so we've been paying more tax than necessary. The previous deferral rate was 5%, so this is quite a jump. I already calculated the estimated effect on the 2014 taxes, and I believe this will save us about $3K in tax. It feels good to get that one done.

[nicknageli]

I'd love to know what the company's payroll department is thinking on that one.  Nice move! 

[MinimalistMoustache]

A 75% deferral -- no matter what -- that IS badass in my book!
Kudos to you and your wife, CS!

[Cheddar Stacker]

I think I actually outsmarted myself on this one. After posting this I posted on another thread about the "credit for child and dependent care expenses" which for those that don't know is a 20% credit for daycare costs up to $3,000/kid. That post reminded me this 75% deferral decreases my wife's eligible wages for this credit, so I need to attempt to have her gross federal taxable income (box 1 on the W-2) equal exactly $6K to take advantage of the full credit of $1,200 for our 2 kids. Bummer.

So while I'm saving about 40% tax (fed, state, plus recapture of some phase-outs) for every dollar I defer, if she dips below $6K wages we lose 20% of it right back, netting only a 20% savings from that point downward. If anyone has a clever work around to this dilemma I'm all ears. As I mentioned above, we can't make a TIRA contribution due to AGI limits and 2 covered employees. If we could do TIRA instead we would still have full wages for the credit.