Is there a "best amount" to earn to keep taxes low?

[oldtoyota]

I'm gleefully able to earn the amount I want--pretty much--and so I began to wonder if there's an optimal amount to earn?

For what I do, less $ means less work. That can be good.

So I could gross $40K with maybe $10K or less in business expenses and be fine. This allows a lot of lovely time for my non-business pursuits.

Or I could gross $100k+ with maybe $10K in business expenses and have less time for non-business pursuits.

At first, the $100K looks the way to go. More, more! We're all taught more equals better.

But do I NEED it?

Not really.

So maybe I want to earn less and, therefore, do less.

Is there a magic number that would cause me to pay less in taxes?

[terran]

Each time you go up a bracket you get to keep less of each additional dollar earned, so you should reevaluate if the real (after tax) hourly wage is still worth it to you.

There are certain "cliffs" which have a much larger marginal difference for a single additional dollar earned such as the savers tax credit and the earned income tax credit, so if you stay just under those income limits you'll get much better tax treatment than just above them.

If you have access to tax deferred retirement accounts and/or have previously contributed to tax deferred retirement accounts that gives you lots of leeway in manipulating your income up or down to hit whatever target you want within reason.

[FINate]

This is not a tax issue, don't frame it as such. I've seen people do crazy illogical things when they let the tail wag the dog on taxes. Generally speaking, taxes in the US will never result in bringing home less money as more is earned. Tax brackets are marginal, they only apply to each additional dollar earned not your entire income.

Your question is really about free time vs. money tradeoffs. Everything, including free time and money, has a utility curve with Diminishing Marginal Utility...that is, the more you have the less you value each additional unit. The sweet spot you're looking for is where utility for free time and money have started to flatten out, the point of diminishing returns. There is no universal function for this because it's very personal, though many studies suggest that $75k of household income is the point of diminishing returns for most.  Many factors can affect this specific number in either direction (cost of living, number and stage of kids, etc.) so it's something you'll have to figure out for yourself.

[MDM]

Is there a magic number that would cause me to pay less in taxes?

Depends on what you do with 401k, tIRA, etc.

Chart below assumes single filer under age 65 with only W-2 income, standard deduction, and contributing the lesser of $18K or 0.9235*gross wage to a 401k.

You could enter numbers more representative of your actual situation in the case study spreadsheet and see how that chart looks.

[FINate]

This is not a tax issue, don't frame it as such. I've seen people do crazy illogical things when they let the tail wag the dog on taxes. Generally speaking, taxes in the US will never result in bringing home less money as more is earned. Tax brackets are marginal, they only apply to each additional dollar earned not your entire income.

Your question is really about free time vs. money tradeoffs. Everything, including free time and money, has a utility curve with Diminishing Marginal Utility...that is, the more you have the less you value each additional unit. The sweet spot you're looking for is where utility for free time and money have started to flatten out, the point of diminishing returns. There is no universal function for this because it's very personal, though many studies suggest that $75k of household income is the point of diminishing returns for most.  Many factors can affect this specific number in either direction (cost of living, number and stage of kids, etc.) so it's something you'll have to figure out for yourself.

Yeah, but sometimes the work involved to take home that marginal amount more per dollar isn’t worth it. So marginal taxes do play a significant role.
But you’re right, people do need to understand the actual math in order to make intelligent decisions.

I totally agree, but that's still an issue of diminishing returns. It's one of the problems with "taxing the rich" (really higher marginal taxes on income) - this has a multiplicative effect because we're taking more dollars that are already diminishing in utility.

[oldtoyota]

If you have access to tax deferred retirement accounts and/or have previously contributed to tax deferred retirement accounts that gives you lots of leeway in manipulating your income up or down to hit whatever target you want within reason.

Thank you! I will ask my accountant. Last year, a contribution to my own company's 401K saved me a bundle in taxes.

[oldtoyota]

Each time you go up a bracket you get to keep less of each additional dollar earned, so you should reevaluate if the real (after tax) hourly wage is still worth it to you.

There are certain "cliffs" which have a much larger marginal difference for a single additional dollar earned such as the savers tax credit and the earned income tax credit, so if you stay just under those income limits you'll get much better tax treatment than just above them.

If you have access to tax deferred retirement accounts and/or have previously contributed to tax deferred retirement accounts that gives you lots of leeway in manipulating your income up or down to hit whatever target you want within reason.

Yep. This.
Tax deferral accounts and how much you anticipate drawing from them yearly in retirement is critical here.

For me, there’s a sweet spot where I generate the max amount of tax deferred account space so I get the maximum benefit from not paying taxes now on high bracket income but will be drawing a very low amount per year from those accounts in retirement. Any income above that and I start making too much and can’t generate enough space to offset the highest taxed dollars.

At one point I was in this stupid spot where I was working long exhausting hours, making too much to offset the highest taxes, and I realized that the last 15+ hours per week that I was working, I was taking a near 50% paycut. So the hours that were the most challenging and the most miserable, were also the shittiest paying. So I stopped working those hours and my per-hour income shot way up.

Good to know. How did you calculate this to know that you were taking a near 50% paycut?

[MDM]

Good to know. How did you calculate this to know that you were taking a near 50% paycut?

One possible scenario: Marginal tax rate under AMT.

[libertarian4321]

Is there a magic number that would cause me to pay less in taxes?

Absolutely.  Just earn enough to qualify the the "earned income tax credit," and the government will "pay you back" money you never paid in to begin with (welfare by another name).