Author Topic: Decreasing Tax Bracket  (Read 432 times)

tharidumuf

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Decreasing Tax Bracket
« on: December 03, 2017, 05:03:56 AM »
I'm trying to figure out if I can drop a tax bracket, from 25% to 15%, using trad 401k contributions. As I've been crunching numbers, I came up with a few questions. While I'm aware tax brackets may soon change, these questions are important to me regardless.

Question 1) What measure of income is used for tax brackets? Taxable?
Question 2) Do I take into consideration the standard deduction or itemized deduction when trying to figure out my tax bracket? For example, using easy numbers, lets say my income after substracting trad 401k and tIRA is 100,000 and my standard deduction is 10,000. When looking into tax bracket ranges, would I use 100,000 or 90,000?
« Last Edit: December 03, 2017, 05:50:32 AM by tharidumuf »

boarder42

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Re: Decreasing Tax Bracket
« Reply #1 on: December 03, 2017, 05:53:20 AM »
You use 90 but what reason are you trying to figure this out for? 
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tharidumuf

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Re: Decreasing Tax Bracket
« Reply #2 on: December 03, 2017, 06:30:13 AM »
You use 90 but what reason are you trying to figure this out for? 

I want to use enough trad contributions to get in the 15% tax bracket and then make good use of my Roth accounts. I just didn't know if the standard or itemized dedications were something that was used when determining your tax bracket.

boarder42

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Re: Decreasing Tax Bracket
« Reply #3 on: December 03, 2017, 06:39:54 AM »
You should use the case study spreadsheet. It will get you there.  Personal exemptions and whatever deduction you take gets you to your taxable level of income
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MDM

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Re: Decreasing Tax Bracket
« Reply #4 on: December 03, 2017, 01:42:43 PM »
Question 1) What measure of income is used for tax brackets? Taxable?
Asked and answered.  Yes, taxable.

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Question 2) Do I take into consideration the standard deduction or itemized deduction when trying to figure out my tax bracket?
Whichever is larger.

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For example, using easy numbers, lets say my income after substracting trad 401k and tIRA is 100,000 and my standard deduction is 10,000. When looking into tax bracket ranges, would I use 100,000 or 90,000?
Neither.  Need to subtract personal exemptions to reach taxable income.

A few minutes (ok, maybe an hour or so) with 2016 Form 1040 - f1040.pdf might be worthwhile.  Start with the calculation for line 43 and go back up the form from there.