Making too much money (taxes)

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12/5/2018 6:14 AM
Edited Date/Time: 12/5/2018 6:16 AM

Me and my wife are in a unique situation this year. We both work for the same company in the steel industry. My pay is performance based bonus, so if we produce more tons, we make more money. Well last year I passed my last technical evaluation for top pay in my department (maintenance mechanic). This has been a record year for the company, so I've made more money in tons and more by evaluation increase leading into the problem...

The problem is being pushed just nearly over into a 2% increase in federal income tax. As of next year, we can max out 401k contributions at 11% a piece from our standard 5% we did this year to help, but that doesn't help me now.

Other than that can you guys think of anything else we can do?

We have no children.

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12/5/2018 7:54 AM

Well, you have no children so that's a net + monetarily speaking. smile Yeah it sucks the more you make the more they take, but, thanks for your contribution to society! smile

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12/5/2018 8:45 AM

Markee wrote:

Me and my wife are in a unique situation this year. We both work for the same company in the steel industry. My pay is performance based bonus, so if we produce more tons, we make more money. Well last year I passed my last technical evaluation for top pay in my department (maintenance mechanic). This has been a record year for the company, so I've made more money in tons and more by evaluation increase leading into the problem...

The problem is being pushed just nearly over into a 2% increase in federal income tax. As of next year, we can max out 401k contributions at 11% a piece from our standard 5% we did this year to help, but that doesn't help me now.

Other than that can you guys think of anything else we can do?

We have no children.

Might look into charitable donations...that doesn’t help you keep it, but it does mean (if the charity is chosen wisely) it’ll go to someone deserving instead of the over-bloated pig we call government.

You might see if your employer can do deferred comp. you pay with pre-tax money, then pay upon withdrawal. The theory is that you lower your taxable income now, then when you draw, you’re retired so your taxable income is less, ie less net taxes in the end. Doesn’t help this year but it would for future.

Might also look at buying a car if you need one anyway, and/or energy efficient home improvements (not sure if that program is still going).

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12/5/2018 8:59 AM

The scaling of taxes seems to be aimed at keeping us poor. It's scary how little your actual take home grows when you expand your gross by tens of thousands.

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It's impossible for a corporation or government to love you or care about you.

12/5/2018 9:07 AM

NorCal 50+ wrote:

The scaling of taxes seems to be aimed at keeping us poor. It's scary how little your actual take home grows when you expand your gross by tens of thousands.

This.
Semi-flat tax 0-200k @10%, 200k-1mil @17%, 1 mil + @25%

No deductions on income tax.

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12/5/2018 9:13 AM
Edited Date/Time: 12/5/2018 9:15 AM

Pre tax medical spending card? Not sure how often you two visit the doctors but you can use it for other things like prescription glasses...ect

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12/5/2018 9:15 AM

NorCal 50+ wrote:

The scaling of taxes seems to be aimed at keeping us poor. It's scary how little your actual take home grows when you expand your gross by tens of thousands.

early wrote:

This.
Semi-flat tax 0-200k @10%, 200k-1mil @17%, 1 mil + @25%

No deductions on income tax.

Go with a consumption tax. 15% on everything except food and healthcare.

That puts you in control on how much you want to pay in taxes. Want to pay less, then consume less. Consume more, then pay more. Simple. No deductions, no income taxes. Just a straight consumption tax.

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12/5/2018 9:17 AM

I dont get how they tax you coming and going. Income tax, sales tax, road tax, fuel tax, tolls

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12/5/2018 9:19 AM

I’m not American. So correct me if I am wrong.
But I assume it works like most other countries, if you get bumped into that extra 2%, you are only paying the extra 2% on every dollar in that tax bracket.
So it’s not like you need to sacrifice to get back below that bracket.
Or am I missing the point?

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12/5/2018 9:19 AM

TXDirt wrote:

Go with a consumption tax. 15% on everything except food and healthcare.

That puts you in control on how much you want to pay in taxes. Want to pay less, then consume less. Consume more, then pay more. Simple. No deductions, no income taxes. Just a straight consumption tax.

So the people that have to spend the highest percentage of their total income to survive have to pay the highest rate? unsure

How about a .5% tax on every stock trade? devil

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12/5/2018 9:20 AM

When you move into a new tax bracket, you only pay the higher tax rate on the income that is above the new, higher threshold. It does not mean you will pay 2% more tax across the board.

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12/5/2018 9:28 AM

NorCal 50+ wrote:

The scaling of taxes seems to be aimed at keeping us poor. It's scary how little your actual take home grows when you expand your gross by tens of thousands.

early wrote:

This.
Semi-flat tax 0-200k @10%, 200k-1mil @17%, 1 mil + @25%

No deductions on income tax.

TXDirt wrote:

Go with a consumption tax. 15% on everything except food and healthcare.

That puts you in control on how much you want to pay in taxes. Want to pay less, then consume less. Consume more, then pay more. Simple. No deductions, no income taxes. Just a straight consumption tax.

The reason this would never work is that it would be too fair and too transparent.

The current system is so complex and confusing that most people don’t realize how much they’re paying at the end of the day when you take into account all of the various taxes we’re hit with.

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12/5/2018 9:30 AM

early wrote:

This.
Semi-flat tax 0-200k @10%, 200k-1mil @17%, 1 mil + @25%

No deductions on income tax.

TXDirt wrote:

Go with a consumption tax. 15% on everything except food and healthcare.

That puts you in control on how much you want to pay in taxes. Want to pay less, then consume less. Consume more, then pay more. Simple. No deductions, no income taxes. Just a straight consumption tax.

early wrote:

So the people that have to spend the highest percentage of their total income to survive have to pay the highest rate? unsure

How about a .5% tax on every stock trade? devil

You need food and healthcare to survive. So that would not be taxable.

But that Escalade would be taxable as that is not needed to survive. If you want to be taxed less on your vehicle then get a Corolla. It's totally up to you.

Want a 5,000 sqft house, then pay more tax on it. Want to pay less taxes, then get a smaller house. Want a vacation home, then pay tax on it. Don't want to pay the consumption tax then don't get the second home.

Generally speaking, those with more money consume more, so they would pay more in taxes. Those that have less money consume less so would pay less in taxes.

The great part is that 1. it's fair to all, and 2. It puts the decision making in your hands about how much you want to pay in taxes. How liberating.

The rich folks with their multiple vacation homes, first glass airfare, BMW's etc would be paying tax on all those items.

Again, it's fair to all and puts the decision in your hand on how much you want to pay in taxes.

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12/5/2018 9:30 AM

2%? That doesn't sound right, for a tax bracket jump. That's minor.

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HAF

12/5/2018 9:32 AM

early wrote:

This.
Semi-flat tax 0-200k @10%, 200k-1mil @17%, 1 mil + @25%

No deductions on income tax.

TXDirt wrote:

Go with a consumption tax. 15% on everything except food and healthcare.

That puts you in control on how much you want to pay in taxes. Want to pay less, then consume less. Consume more, then pay more. Simple. No deductions, no income taxes. Just a straight consumption tax.

early wrote:

So the people that have to spend the highest percentage of their total income to survive have to pay the highest rate? unsure

How about a .5% tax on every stock trade? devil

'to survive'?

Why do higher earners need to spend more 'to survive'?

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HAF

12/5/2018 9:37 AM
Edited Date/Time: 12/5/2018 9:44 AM

TXDirt wrote:

You need food and healthcare to survive. So that would not be taxable.

But that Escalade would be taxable as that is not needed to survive. If you want to be taxed less on your vehicle then get a Corolla. It's totally up to you.

Want a 5,000 sqft house, then pay more tax on it. Want to pay less taxes, then get a smaller house. Want a vacation home, then pay tax on it. Don't want to pay the consumption tax then don't get the second home.

Generally speaking, those with more money consume more, so they would pay more in taxes. Those that have less money consume less so would pay less in taxes.

The great part is that 1. it's fair to all, and 2. It puts the decision making in your hands about how much you want to pay in taxes. How liberating.

The rich folks with their multiple vacation homes, first glass airfare, BMW's etc would be paying tax on all those items.

Again, it's fair to all and puts the decision in your hand on how much you want to pay in taxes.

So do you pay a federal tax on your house and car every year? The economy is being hurt because the buying power of the low and middle class is getting weaker and weaker. Currently the wealth of the country is being concentrated at the top, a consumption tax does not help this situation.

What you are describing is the reason Paris was on fire last weekend.

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12/5/2018 9:40 AM

ns503 wrote:

'to survive'?

Why do higher earners need to spend more 'to survive'?

No, the person making 30k would likely pay a higher percentage of that than the person making 300k. Especially when you factor in state sales tax, gas tax, property tax etc.

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12/5/2018 9:42 AM
Edited Date/Time: 12/5/2018 9:45 AM

You and your wife need to max out your 401k. Both need to put 18,500 in it per year. That lowers your effective rate by $37,000.

Charitable donations. Calculate if giving the church $2000 can save you $2500. If so. Do it. (Example only)


If you plan on having kids consider a college savings If your state allows. In Ohio we can put away before tax money into a college savings. That lowers your rate even more. And seriously you should do this anyway because a college education is probably going to be 250,000+ in 18 years. Or it’s gonna fall flat on its face. Who knows. But might as well get the tax savings now.

Spend the money and see a CPA/financial consultant.

Calculate what you spend in healthcare put it in a HSA.

Can you put money in a Roth IRA if you’ve met your maximum 18,500 contribution in a 401k (if
You can max that out too. I’m not sure about the Roth. Considering starting one of those this year)

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GP740
Since 1987

12/5/2018 9:51 AM

yz133rider wrote:

I dont get how they tax you coming and going. Income tax, sales tax, road tax, fuel tax, tolls

What blows my mind is when buying a new car you pay tax then every time someone else buys it used you pay tax on it as well!!!!!!!!!! hell if a car changes hands 5 times in 6 years think about that....

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"Shifting gears and passing queers" GL

12/5/2018 9:59 AM

yz133rider wrote:

I dont get how they tax you coming and going. Income tax, sales tax, road tax, fuel tax, tolls

JOE_SPROCKETS#1 wrote:

What blows my mind is when buying a new car you pay tax then every time someone else buys it used you pay tax on it as well!!!!!!!!!! hell if a car changes hands 5 times in 6 years think about that....

It’s what keeps the federal government open! Think about taxing horses every time it was sold back in the day. Founders woulda wrote something in the constitution to prevent that!

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GP740
Since 1987

12/5/2018 10:10 AM

GeorgiePorgie wrote:

You and your wife need to max out your 401k. Both need to put 18,500 in it per year. That lowers your effective rate by $37,000.

Charitable donations. Calculate if giving the church $2000 can save you $2500. If so. Do it. (Example only)


If you plan on having kids consider a college savings If your state allows. In Ohio we can put away before tax money into a college savings. That lowers your rate even more. And seriously you should do this anyway because a college education is probably going to be 250,000+ in 18 years. Or it’s gonna fall flat on its face. Who knows. But might as well get the tax savings now.

Spend the money and see a CPA/financial consultant.

Calculate what you spend in healthcare put it in a HSA.

Can you put money in a Roth IRA if you’ve met your maximum 18,500 contribution in a 401k (if
You can max that out too. I’m not sure about the Roth. Considering starting one of those this year)

Don't you pay tax on a Roth though? I believe your contributions aren't pre tax like a company 401k.

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12/5/2018 10:18 AM

Maxing out a Roth does effect your income on your taxes. I've seen it done to drop into a lower income bracket for health insurance purposes.

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12/5/2018 10:31 AM

GeorgiePorgie wrote:

You and your wife need to max out your 401k. Both need to put 18,500 in it per year. That lowers your effective rate by $37,000.

Charitable donations. Calculate if giving the church $2000 can save you $2500. If so. Do it. (Example only)


If you plan on having kids consider a college savings If your state allows. In Ohio we can put away before tax money into a college savings. That lowers your rate even more. And seriously you should do this anyway because a college education is probably going to be 250,000+ in 18 years. Or it’s gonna fall flat on its face. Who knows. But might as well get the tax savings now.

Spend the money and see a CPA/financial consultant.

Calculate what you spend in healthcare put it in a HSA.

Can you put money in a Roth IRA if you’ve met your maximum 18,500 contribution in a 401k (if
You can max that out too. I’m not sure about the Roth. Considering starting one of those this year)

MX915 wrote:

Don't you pay tax on a Roth though? I believe your contributions aren't pre tax like a company 401k.

That's right, IRA withdrawals come out after taxes, it's a good way to set money aside. Since it has already been taxed I don't think it gets taxed as heavily as a 401k is. Aren't taxes great?

I am able to avoid a lot of taxes as a travel nurse. The bad part is that I can't use my non taxed money to qualify for a loan, so I'm kind of screwed. But luckily my wife has a full time non traveling job.

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Instagram: vanillaice782
Amateur helmet painter

12/5/2018 10:54 AM

CM_84 wrote:

I’m not American. So correct me if I am wrong.
But I assume it works like most other countries, if you get bumped into that extra 2%, you are only paying the extra 2% on every dollar in that tax bracket.
So it’s not like you need to sacrifice to get back below that bracket.
Or am I missing the point?

Your assumption is correct. Unless the OP is making more than 150k each they need to increase their 401k so they max out yearly contributions.

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12/5/2018 10:56 AM
Edited Date/Time: 12/5/2018 10:57 AM

smashingpumpkins167 wrote:

That's right, IRA withdrawals come out after taxes, it's a good way to set money aside. Since it has already been taxed I don't think it gets taxed as heavily as a 401k is. Aren't taxes great?

I am able to avoid a lot of taxes as a travel nurse. The bad part is that I can't use my non taxed money to qualify for a loan, so I'm kind of screwed. But luckily my wife has a full time non traveling job.

Do you get a 1099 or W2? If you get a W2 you may lose a lot of deductions thanks to our new and wonderful tax law.

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12/5/2018 11:59 AM

You mean you don't want to pay for the lazy people to live off food stamp type credit cards that are used to buy beer and go to vegas?

The more you make, the more you'll pay to support all the couch potato leaches.

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12/5/2018 1:15 PM

MX915 wrote:

Don't you pay tax on a Roth though? I believe your contributions aren't pre tax like a company 401k.

smashingpumpkins167 wrote:

That's right, IRA withdrawals come out after taxes, it's a good way to set money aside. Since it has already been taxed I don't think it gets taxed as heavily as a 401k is. Aren't taxes great?

I am able to avoid a lot of taxes as a travel nurse. The bad part is that I can't use my non taxed money to qualify for a loan, so I'm kind of screwed. But luckily my wife has a full time non traveling job.

tcannon521 wrote:

Do you get a 1099 or W2? If you get a W2 you may lose a lot of deductions thanks to our new and wonderful tax law.

I file on a w2 since I get that non taxed money I can't really put any of my travel expenses on a W-2. I thought the tax law seemed to give everybody a break because the standard deduction is higher which brings down your taxable income and would enable more people to file their own taxes instead of paying an accountant a couple hundred dollars to do it.

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Instagram: vanillaice782
Amateur helmet painter

12/5/2018 1:15 PM

How about in CA where we just willfully reinstated a regressive tax, and at the same time gave the legislature free reign to impose more regressive taxes just like it whenever they choose without our consent. Looking at you Prop 6 downvoters. . .

It boggles my mind how few people know what they are voting for.

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12/5/2018 1:17 PM
Edited Date/Time: 12/5/2018 1:17 PM

Eh well they can’t go to Vegas and buy alcohol with them but....ok. Lol. Not everyone on assistance is a leach. There are some genuinely good people needing it. WIC etc....

I guess Roth IRA is after tax. So can’t see the benefit in that besides saving long term and knowing your getting exactly what’s in that account in the end....I think I’m gonna have another sit down with financial guy see what my options are now. It’s been a few years.

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GP740
Since 1987

12/5/2018 2:00 PM

CM_84 wrote:

I’m not American. So correct me if I am wrong.
But I assume it works like most other countries, if you get bumped into that extra 2%, you are only paying the extra 2% on every dollar in that tax bracket.
So it’s not like you need to sacrifice to get back below that bracket.
Or am I missing the point?

Exactly right.

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“If I remember how this worked, you’d put a side on, and then you’d go and have something to eat, and then you’d put another side on.” … Mick Jagger