I had my first baby 2 months ago. From what I understand, I get a standard deduction of $4,050 to reduce my taxable income and a tax credit of $1,000. Is this correct?
For 2017, I will make $62,000 and my wife will make $10,000. We will have $10,000 of taxable rental income for a total of $82,000. The standard deduction for a married couple is $12,000 + 4,000 for the child. I should have around $2,000 of student loan interest that is tax deductible, reducing our taxable income to $64,000.
I just want to make sure that we stay under $75,000, which is the 25% tax bracket.
Category | Monthly | Comments | Annual |
Salary/Wages for earner #1 | $5,167 | $62,000 | |
Salary/Wages for earner #2 | $833 | $10,000 | |
Rental income | $833 | $10,000 | |
Rental taxable income | $833 | $10,000 | |
Federal Total Income (for IRS tax) | $6,833 | $82,000 | |
Federal tax | $528 | 2017 rates, MFJ, stand. ded., 3 exempt. | $6,340 |
State/City tax | $0 | Guess, using 0.00% * (AGI - Exempt'n) | $0 |
Soc. Sec. tax | $372 | Assumes 2 earners paying | $4,464 |
Medicare tax | $87 | $1,044 | |
Total income taxes | $987 | $11,848 | |
Filing Status | 2 | 1=S, 2=MFJ, 3=HOH | |
# Exemptions | 3 | ||
# Children <17 | 1 | ||
# Children <13 | 1 | ||
# Children for EIC | 1 | ||
Adult #1 | Adult #2 | ||
Age | 38 | 38 | |
# of earners | 2 | ||
Total Income | $82,000 | ||
Std. Deduct. | $12,700 | ||
Act. Deduct. | $12,700 | ||
Exemption | $12,150 | ||
SL int. (approx.) | $2,000 | ||
AGI | $80,000 | ||
MAGI | $82,000 | ||
Taxable | $55,150 | ||
1040 Tax | $7,340 | ||
Tax after n-r credit | $7,340 | ||
Child Tax Cred. | $1,000 | ||
Net Tax | $6,340 | ||
Monthly | $528 | ||
Item. Deduct. | $0 | ||
Version | V9.02 |
Thanks for the help.
Yes, I understand that the 25% bracket is marginal. However, I still want to avoid it. We will probably approach the 25% tax bracket in 5 years. At that point, I will start putting money into a 403B. I already have a teacher pension that takes out 8%.
Our rental income is around 22K after vacancy and repairs. However, after depreciation (8K) and travel costs for managing the rentals (4K), our taxable rental income is around 10K.
So don't avoid making $75k just to lose 25 cents in taxes.
I would still try to avoid having income in the 25% bracket, and I do by maxing out all pre-tax space. It is usually not 25 cents, for me it is 25% federal + 6% state + either 7.65% for work wages or 15.3% for side hustle income. So 38.65% to 46.3%.That's true for some pre-tax income, most notably employer-sponsored cafeteria plans (HSA, medical insurance, etc.).
Thanks for the help.
Yes, I understand that the 25% bracket is marginal. However, I still want to avoid it. We will probably approach the 25% tax bracket in 5 years. At that point, I will start putting money into a 403B. I already have a teacher pension that takes out 8%.
Our rental income is around 22K after vacancy and repairs. However, after depreciation (8K) and travel costs for managing the rentals (4K), our taxable rental income is around 10K.
You say you get it, but lets make sure it is clear. Tax brackets are actually buckets and you fill the up one at a time. If you were married filing jointly and your income (not counting deduction think very simply) was $75,901, congrats your in the 25% bracket and only 1 dollar is being taxed at 25%. Everything under that filled up your other lower buckets.
It has been proven mathematically on these forums several times that making more that pushes you into a higher bracket is not a bad thing. So don't avoid making $75k just to lose 25 cents in taxes.
I do not have a baby (now or ever), but I do have rental income like you.
I just bought a F350 truck for my rental business. I will get a larger deduction for the truck than your baby. You should have went the truck route, it would have been cheaper in the long run.