Author Topic: How do you calculate the impact of pretax deductions?  (Read 1780 times)

mustachianteacher

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How do you calculate the impact of pretax deductions?
« on: March 14, 2015, 04:57:35 PM »
I apologize in advance if this is a moronic question because I already know it's not a complicated calculation. Unfortunately, the last time I did this was at least 10 years ago, and I can't figure it out anymore.

We want to switch from making post-tax deductions to Roth IRAs to pre-tax deduction to a 457b. Right now, we contribute $800 a month after taxes. I want to contribute as much as it will take to a 457b to "feel" like it's $800 missing from the paycheck, but not more. Because those will be pretax deductions, they will lower our overall tax taken from each paycheck, but how do I figure out how much that amount is? We're in the 25% tax bracket. I completely understand the concept of marginal tax brackets, but I think that's irrelevant in this case.

What's the formula for figuring that out?

Thanks!!

caliq

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Re: How do you calculate the impact of pretax deductions?
« Reply #1 on: March 14, 2015, 05:37:54 PM »
There are various paycheck calculators online.  I'm sure you can just plug numbers in to one and get the answer you're looking for.

michelle

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Re: How do you calculate the impact of pretax deductions?
« Reply #2 on: March 14, 2015, 07:06:30 PM »
800/(1-marginal rate). In your case $1066 pretax.


mustachianteacher

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Re: How do you calculate the impact of pretax deductions?
« Reply #4 on: March 15, 2015, 12:19:38 PM »
800/(1-marginal rate). In your case $1066 pretax.

THANK YOU!! I knew it was something relatively straightforward like that, but I just couldn't sort it out. I think my math muscles need strengthening.