Negative income tax

[acroy]

Haha!!
Uncle Sam paid me 1.4% for 2015
Gross salary around $120k
Single income. DW is SAHM with a small side-hustle teaching fitness classes, costs more or less equal income so it balances out.

Big impacts:
- Mortgage interest
- State sales tax deduction (local rate is 8.25%, the IRS estimate of this amount is quite generous)
- Significant charitable contributions (money/item donations to church, Goodwill, and carefully tracking mileage/travel for all charity work)
- maxing out 401k and HSA to reduce AGI
- Last but most important: 6 child tax credits. Kids are work, but very subsidized.

[primozaj]

- maxing out 401k and HSA to reduce AGI

I'm know this has been discussed on different threads and they all seemed jumbled so I'll just ask my question based on your particular situation.  So maxing out 401k was huge... did you also contribute to a tIRA to lower taxes even more?  I'm just curious because I am personally bouncing between 401k (USG TSP), Roth, and tIRA for the most optimized solution.  I tend to enjoy reading your inputs so that's why I'm asking you directly.

Nonetheless, negative income tax is truly badass.

[acroy]

I have used only traditional 401k, no IRA's for some years.

I'm sure I'm missing out on some potential advantages but here's the reasoning:
- Right now I'm paying little or no income tax (almost feel guilty about this... almost)
- when I hit FI/RE income will go down a lot, as will income tax (especially if we still have tax credits running around the house)
- I am leery of 'locking up' any more assets in any type of account that I can't easily access. Age limits, early withdrawal penalties... Added complexities, with the added risk that politicians may change the laws (change withdrawal penalties, tax status, age etc) at any time.

My asset status is roughly:
$425k in 401k
$150k liquid, taxable investments
$100k home equity
So net worth is around $675k, but only 22% of that is 'liquid'; the rest is tied up.

[Jack]

In general, if other deductions and credits have already reduced your tax liability to $0 and your MAGI is low enough to qualify, that's the situation where contributing to a Roth IRA makes sense.