OT: Taxes

[confettiflyer]

Advertisement - Members don't see this ad

When do Trump's tax brackets plan to be imposed?

At this rate, never.


Sent from my iPhone using SDN mobile app

 

[El Trombopag]

I don't even want to know what our tax rate is. My wife makes over twice what I do and we have no kids. We're selling a house this year and buying real estate so hopefully next year will see some more deductions.


Sent from my iPhone using SDN mobile app

 

[Digsbe]

Why do I pay so much in taxes? My tax rate is 32% yet President Trump can make millions and have a lower tax rate than me. I don't even live in a state with income tax!

Bernie paid 13% and Obama lower than Trump. Hopefully the GOP will bring us some tax relief. I live in a high tax state, my rate is about 36%. I'm single with no kids.

 

[PharmDBro2017]

Bernie paid 13% and Obama lower than Trump. Hopefully the GOP will bring us some tax relief. I live in a high tax state, my rate is about 36%. I'm single with no kids.

That's disgusting (your tax rate). I'm hopeful for tax relief as well.

 

[pezdispenser]

Feel as though I'm doing something wrong with my tax rate is over 31%... no dependents, no kids however

29k Federal
7350 Social security
2k Medicare
5k State
650 School district
1700 City
-------
45,770 Total

Got $2300 back on my return

Most people, including me and whatever news article you read about a politician's tax rate are only quoting the federal effective tax rate, which does not include 6.2% Social Security, 1.45% Medicare or any state and local taxes. Also they may be paying $20-40k+ in mortgage interest, property taxes and state taxes which are tax deductible and will reduce your federal taxes, but at the end of the day you're still losing that $20-40k to a bank or state.

So assuming you made 140k, your federal effective tax rate is 26.7k/140k = 19% which is about right.

Also, the denominator is usually Adjusted Gross Income which does not include 401k or health insurance. Otherwise if you contribute $18k to your 401k which is tax deductible, but still include that in the denominator as your full gross income, your effective tax rate will drop by about 2%.

 

[confettiflyer]

Okay here goes:

Federal
Effective tax rate (on total top line income): 9.38%
Effective tax rate (on AGI): 10%
Marginal tax rate (tax bracket): 28%

State
Effective tax rate (on total top line income): 4.1%
Effective tax rate (on AGI): 4.4%
Marginal tax rate (tax bracket): 9.3%

Notes:
1) Slightly below max for 401k/403b at work
2) Homeowner - accelerated property tax payments, lump sum on 12/2016
3) Deductions (in sum) for mortgage interest, state income tax, and property tax > $37,000
4) Charitable donations were ~$5k (mostly me emptying my garage out and donating items to Goodwill)
5) Tax loss harvested about ($500) in my brokerage account
6) Incorporated a partnership in late 2015 and converted my Schedule C sole-proprietorship into a capital purchase/lease back program. I already passed the "3 out of 5" test with the IRS, so I purchased about $10,000 worth of equipment and immediately took a Section 179 depreciation on them on my 2016 taxes. The lease back payments were minimal, so that was a ~$9,000 net operating loss I was able to include on line 12 of my 1040 (I can go on and discuss the strategy involved here, but that's gonna be too long for this post).
7) Since I kept my sole proprietorship, usual deductions were able to be taken (home office, mileage, etc...), of marginal contribution.

I installed solar panels in 2016 but that's just a credit on the back end.

 

[BMBiology]

Bernie paid 13% and Obama lower than Trump. Hopefully the GOP will bring us some tax relief. I live in a high tax state, my rate is about 36%. I'm single with no kids.

You can't compare Obama to Trump effective tax rate. That is like comparing a pharmacist to a high schooler tax rate. Obviously the pharmacist tax rate should be higher. In some years, Trump did not pay any taxes because he loss money. That is how our tax system work.

36% is your federal and state tax? Does it also include social security, medicare tax? I am pointing this out because people here are just posting their federal tax effective rate and nothing else.


Sent from my iPhone using SDN mobile app

 

[BMBiology]

Okay here goes:

Federal
Effective tax rate (on total top line income): 9.38%
Effective tax rate (on AGI): 10%
Marginal tax rate (tax bracket): 28%

State
Effective tax rate (on total top line income): 4.1%
Effective tax rate (on AGI): 4.4%
Marginal tax rate (tax bracket): 9.3%

Notes:
1) Slightly below max for 401k/403b at work
2) Homeowner - accelerated property tax payments, lump sum on 12/2016
3) Deductions (in sum) for mortgage interest, state income tax, and property tax > $37,000
4) Charitable donations were ~$5k (mostly me emptying my garage out and donating items to Goodwill)
5) Tax loss harvested about ($500) in my brokerage account
6) Incorporated a partnership in late 2015 and converted my Schedule C sole-proprietorship into a capital purchase/lease back program. I already passed the "3 out of 5" test with the IRS, so I purchased about $10,000 worth of equipment and immediately took a Section 179 depreciation on them on my 2016 taxes. The lease back payments were minimal, so that was a ~$9,000 net operating loss I was able to include on line 12 of my 1040 (I can go on and discuss the strategy involved here, but that's gonna be too long for this post).
7) Since I kept my sole proprietorship, usual deductions were able to be taken (home office, mileage, etc...), of marginal contribution.

I installed solar panels in 2016 but that's just a credit on the back end.

Mind posting your AGI and gross income? Federal effective rate of 10% is pretty good.

What kind of documentation do you need for charitable donation? How do you value the things you donated?


Sent from my iPhone using SDN mobile app

 

[confettiflyer]

Mind posting your AGI and gross income? Federal effective rate of 10% is pretty good.

What kind of documentation do you need for charitable donation? How do you value the things you donated?


Sent from my iPhone using SDN mobile app

I'll PM that to you when I get to a computer, and for charitable I used the turbotax ItsDeductible app and there's some built in prices in there.

I donated mostly clothes and household goods...I think for more valuable stuff, you need a legitimate written appraisal (there's a threshold).

I took pictures of the piles of stuff I donated...photos + written documentation, is that defensible in an audit? I'll get back to you if I ever get audited!


Sent from my iPhone using SDN mobile app

 

[BMBiology]

When do Trump's tax brackets plan to be imposed?

From what is being proposed by Trump and from my calculation, some pharmacists may actually pay more in taxes under his plan:

(1) By "simplifying" the tax bracket to just three brackets with the highest rate of 33% for > income $112,500 for singles (sorry pharmacists, you may end up paying 33% on some of your earning instead of the current 28%)

(2) By giving everyone a standard deduction (too bad for a family with a million of mouths to feed).

(3) May limit state income tax deductions (too bad if you live in a state with a high state tax)

(4) May limit mortgage interest rate deductions

But yeah, you won't save much and you may end up paying more. He is also proposing getting rid of the alternative minimum tax which is great for high earners but this won't help most pharmacists.

I don't know why some people just assume they would be better off under a republican or trump tax plan. Did you read his plan and do your own calculation? Do you really think they are there to protect your interest? You are just in the middle class, at best upper middle class. Taxes have come from somewhere and it has to come from a stable and reliable group. That is the middle class.








Sent from my iPhone using SDN mobile app

 

[Digsbe]

You can't compare Obama to Trump effective tax rate. That is like comparing a pharmacist to a high schooler tax rate. Obviously the pharmacist tax rate should be higher. In some years, Trump did not pay any taxes because he loss money. That is how our tax system work.

36% is your federal and state tax? Does it also include social security, medicare tax? I am pointing this out because people here are just posting their federal tax effective rate and nothing else.


Sent from my iPhone using SDN mobile app

36% is on all my taxes. Federal, FICA, state, county.

 

[Momus]

That's what I did- and from what I have read online photos + receipt from Goodwill + documentation of what you donated is good enough.

I only donated about 1K of stuff this year- I had more stuff to take but I guess I'll do it this year lol

I have a middle eastern friend that goes to church a lot, I'm not sure how much he donates but he told me he got a written receipt for $3k just asking for it lol (his church people asked him, how much, he said "iono, I am not sure the total", they wrote one for him)... That's cash donation proof right there.

 

[owlegrad]

When I asked for a receipt from Goodwill they literally gave me a blank slip. It was signed but otherwise I could have filled it in with anything. I think I could have written in "Car" if I had wanted to.

 

[Monsterdaddy]

And that's why you need to keep the pictures and TurboTax's It's Deductible for valuations.

P.S. Church receipts must include some language about no goods or services received or its disallowed: http://www.ustaxcourt.gov/InOpHistoric/durdenmemo.TCM.WPD.pdf

 

[TheBlaah]

Bernie paid 13% and Obama lower than Trump. Hopefully the GOP will bring us some tax relief. I live in a high tax state, my rate is about 36%. I'm single with no kids.

Just a heads-up: under Trump's proposed tax plan, if you earn more than 140k as a single earner, you start paying more in taxes when you start earning more than 140k and continued that way until you reach 500k. Realistically though, any difference in taxes for most pharmacists will probably amount 1-2k max.

Married folks will generally pay less in taxes though. So there's that.

 

[Momus]

Just a heads-up: under Trump's proposed tax plan, if you earn more than 140k as a single earner, you start paying more in taxes when you start earning more than 140k and continued that way until you reach 500k. Realistically though, any difference in taxes for most pharmacists will probably amount 1-2k max.

Married folks will generally pay less in taxes though. So there's that.

IF you married a stay at home spouse... Marriage penalty, look it up. I personally wouldn't even bother dating someone unemployed since I live in CA... so there is that.

 

[TheBlaah]

IF you married a stay at home spouse... Marriage penalty, look it up. I personally wouldn't even bother dating someone unemployed since I live in CA... so there is that.

Looked it up. Sounds like it's the other way around: marrying a stay at home spouse earns you a tax bonus, while marrying an equal income partner may net you a penalty. Unless you're seeing something I'm not.

Edit: Realized you basically said what I responded with, though in a somewhat confusing way. Anyway, it looks like when one spouse's income doubles the other's is about where the income taxes become equal with an unmarried couple.

In any case, they can always just file taxes separately.

 

[BMBiology]

Looked it up. Sounds like it's the other way around: marrying a stay at home spouse earns you a tax bonus, while marrying an equal income partner may net you a penalty. Unless you're seeing something I'm not.

I think that is what Momus said...in his own way.

Stay a home spouse = pay less taxes (obviously).

In addition to you getting your social security, your wife would also get an additional 0.5x your social security (if married for at least 10 years).

She can contribute to an IRA which would further reduce your tax liability.

Since you guys are not going to make as much, your kids may even qualify for college financial aid.

A lot of tax benefits from marrying a stay at home spouse. I can go on, on and on.



Sent from my iPhone using SDN mobile app

 

[trailerpark]

As a single guy with no kids and renting an apartment with a salary of 140K, I get raped in taxes. Why can't you use pre-tax dollars to pay off government student loans? It seems like it would be the biggest win win for both the government and borrowers!?[emoji848]


Sent from my iPhone using SDN mobile app

 

[FarmD711]

As a single guy with no kids and renting an apartment with a salary of 140K, I get raped in taxes. Why can't you use pre-tax dollars to pay off government student loans? It seems like it would be the biggest win win for both the government and borrowers!?[emoji848]


Sent from my iPhone using SDN mobile app

This is all I want out of life. It would make such a huge difference for me to be able to use pretax dollars to pay back student loans. I can't even deduct the interest. Yeah I make 140k but I owe 280k.....


Sent from my iPhone using SDN mobile

 

[Paxil_Rose]

.

 

[confettiflyer]

When I asked for a receipt from Goodwill they literally gave me a blank slip. It was signed but otherwise I could have filled it in with anything. I think I could have written in "Car" if I had wanted to.

You'd get killed in a paper audit, they'd ask for the proof of disposition of the car by the charity (1098-C) and you'd stand there slack jawed.

Unless you were donating a $499 car.

Then I'd ask wtf you're doing with such a janky car. Hahahah

(Yah I know you're joking but you picked the wrong example to joke about)

/tax geek


Sent from my iPhone using SDN mobile app

 

[297point1]

You'd get killed in a paper audit, they'd ask for the proof of disposition of the car by the charity (1098-C) and you'd stand there slack jawed.

Unless you were donating a $499 car.

I can see Owle now: "Of course I donated a $499 car, Mr. Tax Auditor...in fact, I donated 14 of them last year for a $6,986 deduction. See?" (shows camera phone picture of a used car dealership lot)

 

[confettiflyer]

I can see Owle now: "Of course I donated a $499 car, Mr. Tax Auditor...in fact, I donated 14 of them last year for a $6,986 deduction. See?" (shows camera phone picture of a used car dealership lot)

HAHAHAH oh that one made my day


Sent from my iPhone using SDN mobile app

 

[mfdoom]

I'm still kind of clueless about anything re: taxes so I'm hoping someone can help me here...I recently started a per diem job in addition to a full-time position. My W-4 for the full-time currently has 2 allowances (1 for independent, 1 for single/one job); then I put 1 allowance for the per diem. Do I need to change my full-time W-4 to 1 allowance since I now have more than one job? Google tells me that I should put all allowances (i.e. 1?) on my full-time, then put 0 on my per diem and fill out the multiple jobs worksheet in case of any additional required withholdings. Is this correct?

 

[pezdispenser]

I'm still kind of clueless about anything re: taxes so I'm hoping someone can help me here...I recently started a per diem job in addition to a full-time position. My W-4 for the full-time currently has 2 allowances (1 for independent, 1 for single/one job); then I put 1 allowance for the per diem. Do I need to change my full-time W-4 to 1 allowance since I now have more than one job? Google tells me that I should put all allowances (i.e. 1?) on my full-time, then put 0 on my per diem and fill out the multiple jobs worksheet in case of any additional required withholdings. Is this correct?

I have this issue myself. When you work another job the tax withholding there is going to be way off. Say you earn 40k at your 2nd job and 110k at your main job. The 2nd job will only withhold taxes in the tax brackets for 40k which are 10%, 15% and a bit at 25% for >38k. But when you total everything up on your tax return, you will get taxed on 150k of total income, so the 40k will be up in the 28% tax bracket resulting in you owing more unless you change your W-4.

You can try the multiple jobs worksheet but it is quite confusing. I have a spreadsheet with all my paychecks and investments to keep a running total of my taxes, so I have used it to work out that I need to claim 0 allowances at my main job, and 0 allowances + additional $100 per paycheck at my per diem job, for it to come out close. Actually I aim to owe a few hundred dollars on my tax return, but always <$1000 otherwise the IRS may charge you a penalty.

 

[Muse600]

you guys just do your taxes yourself?

also single, 2016 was first year with duplex

in the past a 1040EZ/A and/or turbotax and follow the instructions were sufficient...this year was going to just read up and do the same, but not sure if it's more complicated with property...got an appointment with a CPA, but sometimes they don't even know some of the basics

 

[mfdoom]

I have this issue myself. When you work another job the tax withholding there is going to be way off. Say you earn 40k at your 2nd job and 110k at your main job. The 2nd job will only withhold taxes in the tax brackets for 40k which are 10%, 15% and a bit at 25% for >38k. But when you total everything up on your tax return, you will get taxed on 150k of total income, so the 40k will be up in the 28% tax bracket resulting in you owing more unless you change your W-4.

You can try the multiple jobs worksheet but it is quite confusing. I have a spreadsheet with all my paychecks and investments to keep a running total of my taxes, so I have used it to work out that I need to claim 0 allowances at my main job, and 0 allowances + additional $100 per paycheck at my per diem job, for it to come out close. Actually I aim to owe a few hundred dollars on my tax return, but always <$1000 otherwise the IRS may charge you a penalty.

So would it be more prudent to calculate a total income from both jobs and the theoretical tax owed, then look through my paystubs to see what is actually being withheld, and then tweak the W-4 allowances to match? I too would rather owe a few hundred and get more out of my paychecks than get a huge chunk back as a return.

 

[confettiflyer]

you guys just do your taxes yourself?

also single, 2016 was first year with duplex

in the past a 1040EZ/A and/or turbotax and follow the instructions were sufficient...this year was going to just read up and do the same, but not sure if it's more complicated with property...got an appointment with a CPA, but sometimes they don't even know some of the basics

I'm a firm believer in doing your own taxes...it lets you get to the nitty gritty of what all your actions are doing, and lets you strategize for the coming year.
I've been doing my own since I was 16, each time with an escalating level of difficulty (high school dependent, started college, independence, ended college, new deductions, started business, changed states, bought house, incorporated, started investing/harvesting losses, etc...)*

Once you've hit the ceiling and are on cruise control, only then do I think one should hire outside (for additional insight)....but even then, once you get your consult, you can just replicate on your own.


*I do have accountant, attorney, and CPA friends I bounce ideas off of...I'm not in a total vacuum. Mostly it's me asking if a particular move is legal. Most of my knowledge is from reading the IRS booklets themselves and blogs/other formal books.


Sent from my iPhone using SDN mobile app

 

[pezdispenser]

So would it be more prudent to calculate a total income from both jobs and the theoretical tax owed, then look through my paystubs to see what is actually being withheld, and then tweak the W-4 allowances to match? I too would rather owe a few hundred and get more out of my paychecks than get a huge chunk back as a return.

Yep that is a simple way to do it.

 

[Momus]

You should be doing your own taxes unless your situation changes dramatically (owning a business/rentals/K-1 Forms). Go to an accountant once, next year, DIY with TurboTax/Taxact/Credit Karma (free - but doesn't support multiple states yet), look your last years forms and just copy how your accountant did it. It's pretty easy and self explanatory.

Also, this is a money saving trick for you guys using TT. Have a bunch of friends that do their own taxes, buy a CD version (it's better since you can switch back and forth between forms and questionnaires flawlessly), and pass along the CD once you install it to your computer among your friends and split the cost. You can use 1 CD to file unlimited returns (online sucks, every single person has to pay full price, and access to forms is limited). Each computer that installs Turbo tax can do free 5 federal e-filings, but if you want to do more, you can just print and snail mail 20,000+ tax filings. There is no serial number on Turbotax product so you can share it with anyone. You only need to pay state e-filing. For CA, that's a $19.99 fee, but if you wanna do snail mail, it's free.

 

[rxdawg21]

I figured I'd chime in.

Wifes AGI near 92k
total federal tax 14.9%
state tax 4.56%
~$8400 for FICA, would love to have a crystal ball and see what we get back out of that in the future.

Myself AGI ~102k (includes rental that was profitable above all deductions by about 2k as well as second job)
Federal 18.76%
State 5.27%
~9k for FICA

Unfortunately, I didn't look into how splitting up our mortgage interest/property tax could benefit us. Looking at how my tax rate is significantly higher putting more of the deductions towards me could have saved us some a few hundred. We put all the primary mortgage/property tax towards wife for simplicity sake.

We file separately due to PSLF for the wife.

Not as bad as I thought but still a nice luxury SUV in cash every year (combined federal, state, FICA) and this doesn't include the taxes on everything we buy.

 

[PAtoPharm]

I figured I'd chime in.

Wifes AGI near 92k
total federal tax 14.9%
state tax 4.56%
~$8400 for FICA, would love to have a crystal ball and see what we get back out of that in the future.

Myself AGI ~102k (includes rental that was profitable above all deductions by about 2k as well as second job)
Federal 18.76%
State 5.27%
~9k for FICA

Unfortunately, I didn't look into how splitting up our mortgage interest/property tax could benefit us. Looking at how my tax rate is significantly higher putting more of the deductions towards me could have saved us some a few hundred. We put all the primary mortgage/property tax towards wife for simplicity sake.

We file separately due to PSLF for the wife.

Not as bad as I thought but still a nice luxury SUV in cash every year (combined federal, state, FICA) and this doesn't include the taxes on everything we buy.

Just curious, are you in retail or hospital?

 

[confettiflyer]

What type of company did you start?

Stationery and paper goods


Sent from my iPhone using SDN mobile app

 

[Momus]

I meant to do that but this year but I wanted to finish my taxes before selling - I thought it was free e-filing x 5 for the CD, not x5 for the computer. Maybe I can still sell it ? Lol

Pretty much.