Just for fun, a quick calculation shows a couple between the ages of 55 and 65 (i.e., eligible for the maximum HSA deduction) can earn $153,650 in W-2 wages and owe $0 federal income tax They would owe some FICA tax. This allows for the maximum HSA, tIRA, 403b and 457 deductions. It does not include children and the tax opportunities typically associated with them, e.g., exemptions, child tax credit, and education credits (although in theory the adults could have education credits themselves).
Category | Monthly | Comments | Annual |
Salary/Wages | $12,804 | | $153,650 |
HSA | $721 | | $8,650 |
FICA base salary/wages | $12,083 | | $145,000 |
|
Traditional IRA | $1,083 | At maximum | $13,000 |
401(k) / 403(b) / TSP / etc. | $4,000 | At maximum | $48,000 |
457 plans | $4,000 | At maximum | $48,000 |
|
Federal Total Income | $3,000 | | $36,000 |
|
Federal tax | $0 | | $0 |
Filing Status | 2 | 1=S, 2=MFJ | |
# of earners | 2 | | |
Total Income | $36,000 | | |
|
Std. Deduct. | $12,600 | | |
# Exempt. | 2 | | |
Exemption | $8,000 | | |
|
AGI | $36,000 | | |
MAGI | $49,000 | | |
Taxable | $15,400 | | |
Tax | $1,540 | | |
Savers' credit | $2,000 | | |
Tax after n-r credit | $0 | | |
Even better, by throwing long term capital gains (and/or qualified dividends) into the mix, our happy couple could gross $209,015 and still have $0 federal income tax due.
Category | Monthly | Comments | Annual |
Salary/Wages | $9,804 | | $117,650 |
HSA | $721 | | $8,650 |
FICA base salary/wages | $9,083 | | $109,000 |
|
Traditional IRA | $739 | At maximum | $8,863 |
401(k) / 403(b) / TSP / etc. | $4,000 | At maximum | $48,000 |
457 plans | $4,000 | At maximum | $48,000 |
Income subject to IRS tax | $345 | | $4,137 |
|
|
Qualified dividends | $7,614 | | $91,365 |
|
Federal Total Income | $7,959 | | $95,502 |
|
Federal tax | $0 | | $0 |
Filing Status | 2 | 1=S, 2=MFJ | |
# of earners | 2 | | |
Total Income | $95,502 | | |
|
Std. Deduct. | $12,600 | | |
Act. Deduct. | $12,600 | | |
# Exempt. | 2 | | |
Exemption | $8,000 | | |
|
AGI | $95,502 | | |
MAGI | $104,365 | | |
Taxable | $74,902 | | |
Tax | $0 | | |
Of course, YMMV, but is there anything amiss with the calculations given the assumptions? Anyone have a more extreme example?
I didn't think you could max out your 457K and still contribute to an IRA. Plus, I don't know of any one who can both contribute to a 457K and a 401K. Am I correct?
Plus, to contribute that much to the 457K (that is $36,000 on top of the max. for 2015 of $18,000, total $54,000) you'd have to be within 3 years of normal retirement (therefore not helping with the RE part). Not sure where you get the $44,000.
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-457b-Contribution-LimitsEDIT - as the $54,000 above may be incorrect. Not sure but the rules may only allow a total of $36,00, not $36,000 plus $18,0000. Maybe someone can correct this.