Please check my take home pay math!

[cjb]

Hello mustachians,

I'm just graduating college and have gotten my first full-time job as a software developer. From what I understand I am in a position to push my taxable income down into a lower state and federal tax bracket. My understanding is that this will actually increase my take home pay, but I am new to all of this so I really need some insight from more experienced mustachians!

Here are the details:

Gross Salary: 52,000
25% Federal Bracket (2016): 37,651 - 91,150
6% Louisiana State Bracket (All I could find was 2015): 50,001 - over

Okay... I work for a university and I am choosing to enter the Optional Retirement Plan (ORP) program, money is taken out pre-tax, the yearly contribution is 8% salary.
ORP: 4,160

52,000 - 4,160 = 47,840 (Taxable Income)

I'll be doing a 403b and what I've worked up is that I need to contribute at least 10,189 to hit that lower limit on the federal tax bracket, but I'm calling it 10,200.
403b: 10,200

47,840 - 10,200 = 37,640 (Taxable Income)

Now I am in the 4% Louisiana state tax bracket, and the 15% federal tax bracket. Now I'll deduct taxes and medicare, which I believe is 1.45%

Everything up to 9,276 is taxed at 10% (Fed)
10% bracket: 927.6

Everything above 9,276 is taxed at 15% (Fed)
15% bracket: 4,254.6

Everything up to 12,500 is taxed at 2% (State)
2% bracket: 250

Everything above 12,500 is taxed at 4% (State)
4% bracket: 1,005.6

Medicare: 545.78

Total Taxes: 6,983.58

Net Salary: 30,656.42

Is it this easy? Did I do this correctly? Will that be my actual take home pay? I believe this is possibly very naive and incorrect, so please fellow mustachians, bring me back to reality if I'm wrong!

Just fyi, I plan to invest a lot more than this, maxing a Roth IRA etc... This is just my bare minimum to fiddle with the taxes.

Thanks in advance!

[dandarc]

You forgot your standard deduction and personal exemption.  That right there is $10,350 for a single person in 2016.  You subtract that before you pay any federal income taxes.  What you're using is called Adjusted Gross Income, which matters, but is not the figure your income taxes are based on.

A lot of states piggy-back off your federal taxable income, but you might want to pull the forms for Louisiana to be sure.

[Enough]

Looks like you remembered Medicare, but not Social Security which is 6.2%.  Also if you are trying to calculate take home pay for budgeting, don't forget to factor in healthcare premiums.

[cjb]

Ah I didn't even know about those. Can you give me a brief overview of those before I go do some research on them?

Good catch Enough, but the ORP actually replaces SS at the university :D

[dandarc]

You also forgot Social Security.  Social Security is 6.2%.

Unless somehow you're in a job where you don't have to pay Social Security.  That is unusual though.

Also, Social Security and Medicare are taxed on your gross less certain things like Health Insurance Premiums and HSA contributions.  So 7.65% * 52000 = $3978.

[dandarc]

You may want to check out the following:

Cheddar's US Tax Guide.  Explains lots of things related to federal taxes.
http://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/

There is a spreadsheet in this thread.  Play around with it.  Pretty darn good for more-or-less standard federal tax questions.
http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

And then if you really want to learn tax stuff, download a 1040 and your state tax forms and fill them out.  By hand.  State taxes are particularly difficult on a forum like this, as they vary widely.

[cjb]

Thanks for the resources!

[protostache]

I use the calculators at Paycheck City all the dang time. The "Salary Calculator" will help you figure this stuff out while letting you play with the number of allowances, adding deductions, etc. Granted, this will only calculate *withholding*, but it will give you a base to work from as you're figuring out your optimizing.

[dandarc]

Are you also eligible for the 457?

https://louisianadcpretire.gwrs.com

If so, and you're posing this question here because you're interested in early retirement, I'd give that a strong look before the 403b.

[cjb]

Thanks dandarc, I looked into the 403b pretty hard, but I didn't give any attention to the 457.

[cjb]

Wow the 457 is awesome!

[dandarc]

Wow the 457 is awesome!

Yep - tailor-made for the early retiree.

I always like to point this out when it appears possible - with a 457 and 403B available at your salary, you could pay zero federal income taxes.  http://rootofgood.com/make-six-figure-income-pay-no-tax/.  Note that in your case, you'd likely be using the saver's tax credit as opposed to rootofgood's child tax credits, but same basic equations.  You'd have to be pretty frugal and live on a bit under $1200 per month (by my back-of-the napkin math), but definitely possible.

Whether or not you should shoot for something like this is a difficult question.  Depends on the overall arc of your life, goals, etc.  If you think your income is going to go up substantially, maybe not - if you'll find yourself in higher tax brackets later, you'll save more taxes deferring then.  How does a partner work into your plans?  Lots of questions there.