Author Topic: Help with 2019 elections & taxes!!  (Read 519 times)

frugalfoothills

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Help with 2019 elections & taxes!!
« on: November 06, 2018, 10:32:09 AM »
Hi all,

As we roll into the end of the year, I'm trying to prepare myself to change my 401k and HSA elections, but I am embarrassingly bad at understanding taxes and such. Can I get some help?

2018 wages:
Gross base salary: $69,901
Gross bonus: $10,001
Total Gross Wages: $79,902

Until now I have only contributed up to my company match with 401k (6%) and a small amount to HSA ($20 per paycheck, or $520 per year... company contributes additional $800 a year.) I want to up that in 2019 now that I have my feet under me thanks to this website... you guys are great!

Question 1:
Salary for 2019 should be slightly higher with COL raise, but TBD, so basing this off 2018 numbers. Also, my bonus is a lump sum payment in January, and I budget per paycheck, so I'm thinking I'll just use my base salary for this... does that make sense?

$69,901 (gross base salary)
-$18,500 (max 401k)
-$2,400 (max HSA, minus employer contributions)
-$1,364 (medical pretax)
= $47,634 gross

Here's where I'm trying to figure out the implications to my take-home... I'm looking at my current tax situation and it seems like I'm paying a ton. It looks like for 2018 it was:
OASDI: $4,278
Medicare: $1,000
State: $3,770
Federal: $7,566
Total: $16,614 (again -- does not include my bonus which was taxed almost 4k)

Based on my current 6% 401k contribution and measly $520 HSA contribution (and medical pre-tax) my gross pay for 2018 was $63,831 (without bonus.) Looking at my tax situation above, that looks like 26%. That seems super high, right? My withholding is set to Single (Federal & State), Federal Allowances: 2 and State: 1. I have no clue why it's set like that... I don't really understand what it should be set to. Should I change this? What to?

So I guess my main question is--if I drop my gross (base) pay from $63,831 to $47,634 by upping 401k, HSA (and medical pretax stays the same), what can I expect for my post-tax income to look like? What rate should I apply? How do I figure my per-paycheck estimate?

My annual expenses are $36,000 (including mortgage), so I KNOW the math should work. I am just scared to max everything and find myself struggling paycheck to paycheck.

wenchsenior

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Re: Help with 2019 elections & taxes!!
« Reply #1 on: November 06, 2018, 10:48:47 AM »
Are you filing singly? That federal tax seems very high. I can't speak to the state rate. ETA: Ok, I think I'm confusing some of your current year vs projected year.

If you paid 7566 on about 80K of income (assuming you already took out any tax benefit contributions), then that looks right to me.


For single filer 2019, if you are projecting

$69,901 (gross base salary)
-$18,500 (max 401k)
-$2,400 (max HSA, minus employer contributions)
-$1,364 (medical pretax)
= $47,634 gross

Then presumably your federal taxable income will be 47634-12000 = 35634

it looks like federal taxes would then be 0.10(9525) + 0.12(26108) = ~4060 give or take



« Last Edit: November 06, 2018, 10:59:11 AM by wenchsenior »

simonsez

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Re: Help with 2019 elections & taxes!!
« Reply #2 on: November 06, 2018, 10:55:53 AM »
401k limit is 19k for 2019, HSA limit for a single person is $3500 (was $3450 for 2018, not sure where you saw $3200=$2400+$800).

Also, if this is your first time maxing, double check with payroll how many pay periods you will have in 2019 to split them across.  It's easy to adjust but could cost a few hundred dollars of free matched money if you're not careful.  Years aren't exactly divisible by 7, 14, etc.

swinginbeef

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Re: Help with 2019 elections & taxes!!
« Reply #3 on: November 06, 2018, 10:57:33 AM »
this doesn't answer your question at all but may ease your concern. Check your plans because many HSA and 401k plans allow you to make changes in withholding at any time, for any reason. If that's the case and you have a little bit of an emergency fund buffer, I'd say go all in and then if you find the budget is a little too tight after a couple months you can reduce your 401k/HSA withholdings to find your happy balance.

frugalfoothills

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Re: Help with 2019 elections & taxes!!
« Reply #4 on: November 06, 2018, 11:52:43 AM »
Are you filing singly? That federal tax seems very high. I can't speak to the state rate. ETA: Ok, I think I'm confusing some of your current year vs projected year.

If you paid 7566 on about 80K of income (assuming you already took out any tax benefit contributions), then that looks right to me.


For single filer 2019, if you are projecting

$69,901 (gross base salary)
-$18,500 (max 401k)
-$2,400 (max HSA, minus employer contributions)
-$1,364 (medical pretax)
= $47,634 gross

Then presumably your federal taxable income will be 47634-12000 = 35634

it looks like federal taxes would then be 0.10(9525) + 0.12(26108) = ~4060 give or take

The $7,566 is on the $69,901 base... I looked at my paystub from my $10K bonus and there was another $1,800 Federal tax withheld on that... so for the full $80K it's about $9,375 federal withheld.

wenchsenior

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Re: Help with 2019 elections & taxes!!
« Reply #5 on: November 06, 2018, 01:10:45 PM »
Are you filing singly? That federal tax seems very high. I can't speak to the state rate. ETA: Ok, I think I'm confusing some of your current year vs projected year.

If you paid 7566 on about 80K of income (assuming you already took out any tax benefit contributions), then that looks right to me.


For single filer 2019, if you are projecting

$69,901 (gross base salary)
-$18,500 (max 401k)
-$2,400 (max HSA, minus employer contributions)
-$1,364 (medical pretax)
= $47,634 gross

Then presumably your federal taxable income will be 47634-12000 = 35634

it looks like federal taxes would then be 0.10(9525) + 0.12(26108) = ~4060 give or take

The $7,566 is on the $69,901 base... I looked at my paystub from my $10K bonus and there was another $1,800 Federal tax withheld on that... so for the full $80K it's about $9,375 federal withheld.

That sounds about right.  My very quick back of envelope calculations gave me:

80000-12000 = ~68000 taxable. 

~  (9526 x 0.10) + (29174 x 0.12) + (29300x.22) = 953 + 3501 + 6446 = ~10900 owed in fed tax

Maxing your 401k will definitely drop your federal taxes a lot b/c it will remove that third bracket.

frugalfoothills

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Re: Help with 2019 elections & taxes!!
« Reply #6 on: November 06, 2018, 02:28:12 PM »
Are you filing singly? That federal tax seems very high. I can't speak to the state rate. ETA: Ok, I think I'm confusing some of your current year vs projected year.

If you paid 7566 on about 80K of income (assuming you already took out any tax benefit contributions), then that looks right to me.


For single filer 2019, if you are projecting

$69,901 (gross base salary)
-$18,500 (max 401k)
-$2,400 (max HSA, minus employer contributions)
-$1,364 (medical pretax)
= $47,634 gross

Then presumably your federal taxable income will be 47634-12000 = 35634

it looks like federal taxes would then be 0.10(9525) + 0.12(26108) = ~4060 give or take

The $7,566 is on the $69,901 base... I looked at my paystub from my $10K bonus and there was another $1,800 Federal tax withheld on that... so for the full $80K it's about $9,375 federal withheld.

That sounds about right.  My very quick back of envelope calculations gave me:

80000-12000 = ~68000 taxable. 

~  (9526 x 0.10) + (29174 x 0.12) + (29300x.22) = 953 + 3501 + 6446 = ~10900 owed in fed tax

Maxing your 401k will definitely drop your federal taxes a lot b/c it will remove that third bracket.

I really appreciate you going through this but I am still super confused. What's the 80K-12K? Wouldn't it be 80K(gross)-18.5K(401k)-2650(HSA)-1400(pretax medical)=$57,450 taxable? I told you I'm terrible at this!!

DS

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Re: Help with 2019 elections & taxes!!
« Reply #7 on: November 06, 2018, 02:46:02 PM »
I really appreciate you going through this but I am still super confused. What's the 80K-12K? Wouldn't it be 80K(gross)-18.5K(401k)-2650(HSA)-1400(pretax medical)=$57,450 taxable? I told you I'm terrible at this!!

$12,000 Standard Deduction - 2018 amount (might be slightly higher for 2019 - est. 12,200)

Lucky Recardito

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Re: Help with 2019 elections & taxes!!
« Reply #8 on: November 06, 2018, 03:33:23 PM »
Re. your paycheck anxiety: It's worthwhile to spend some time with a paycheck calculator tool to play with the options you're considering.

https://www.paycheckcity.com/calculator/salary/

For 2019 planning, choose an early-Jan 2019 paycheck date, and leave gross pay YTD as 0.

When entering deductions, 401k (assuming Traditional not Roth) is exempt from Federal and State. Same w/ medical premiums. HSA is exempt from Federal, State, and FICA.

(If you're feeling nervous about using the calculator right, grab a recent 2018 paystub and see if you can re-create it. It's also possible to learn how all this math is done to do this by hand, but using an online calculator is a fair start!)

To the question of how to set your withholding: if you're up to calculating your expected tax liability and then comparing that to your withholding, others are chiming in on that question and I'll let them carry on!

Another option, though, is to mess around with the IRS withholding calculator: https://www.irs.gov/individuals/irs-withholding-calculator. It's only for 2018 right now, but it should get you in the ballpark.


wenchsenior

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Re: Help with 2019 elections & taxes!!
« Reply #9 on: November 06, 2018, 04:29:51 PM »
I really appreciate you going through this but I am still super confused. What's the 80K-12K? Wouldn't it be 80K(gross)-18.5K(401k)-2650(HSA)-1400(pretax medical)=$57,450 taxable? I told you I'm terrible at this!!

$12,000 Standard Deduction - 2018 amount (might be slightly higher for 2019 - est. 12,200)

Right, 2018 standard deduction.  The OP's questions were somewhat confusing.  OP thought their tax rate seemed excessive, and I was trying to see if the tax being withheld for 2018 looked about right.  It does. If anything, OSDI and Medicaid seem a little low...

Again, I can't speak to state taxes, but federal taxes look about right for 80K gross income filing single.

Then the OP seemed to want to know what taxes would be given their projected 2019 salary, with estimated maxing of the tax shelters like 401K etc. So I ran that number.

The comparisons are 2018: ~10,900 fed taxes owed
                                  2019 ~4060 fed taxes owed

So OP, maxing your tax shelters will definitely reduce your federal taxes. Assuming you can afford (cash wise) to lock those $ up, it can definitely pay off.  I'm assuming you will see a decent drop in your state tax burden as well.

MDM

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Re: Help with 2019 elections & taxes!!
« Reply #10 on: November 06, 2018, 05:07:26 PM »
If you like web sites, some good ones have already been mentioned.

If you like spreadsheets, the case study spreadsheet will also do tax and withholding calculations.

frugalfoothills

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Re: Help with 2019 elections & taxes!!
« Reply #11 on: November 07, 2018, 10:12:46 AM »
Thank you all so much! Sorry if my original questions were confusing... it's because I am confused. ;) Really appreciate all the guidance.

The paycheck calculator is cool and I think that's what I need. I'll try to recreate my existing paystub and then back my way into my desired 2019 paychecks...

Thank you all!