understanding the tax impact of the standard deduction

[Anonymous]

If we are married filing jointly, I see that we are typically in the 22% marginal tax rate. For 2024 22% starts for income above $94,300. But we typically have the standard deduction. For 2024 it's $29,200.

So, does this mean we are only taxed 22% for income above $123,500?

I am thinking to do our best to stay under $123,500 in federal taxable income if this is the case.

Thanks for any feedback.

[Anonymous]

I don't have the tables in front of me and I don't feel like googling

The tax is progressive. Even if you exceed a threshold in income, you still have more money than if you did not exceed the threshold. There is no incentive in this case we are discussing to not earn income above a certain dollar amount.

[Anonymous]

Anonymous wrote:I don't have the tables in front of me and I don't feel like googling

The tax is progressive. Even if you exceed a threshold in income, you still have more money than if you did not exceed the threshold. There is no incentive in this case we are discussing to not earn income above a certain dollar amount.

Agree with this. ^

The big question for higher income taxpayers is generally whether to take the standard deduction or itemize. For most people that boils down to whether or not you have a home mortgage and pay significant state and/or local taxes.

[Anonymous]

As PP said, income tax is progressive. So if you bump up into another tax bracket due to increased income, your ENTIRE income is not subject to the increased %.

[Anonymous]

The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

[Anonymous]

Anonymous wrote:The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

This is us. We ran the numbers on standard v itemizing when deciding about mortgage amount. Taking out a larger mortgage in order to itemize barely saved us any money in income tax and increased what we were paying in interest.

[Anonymous]

Anonymous wrote:If we are married filing jointly, I see that we are typically in the 22% marginal tax rate. For 2024 22% starts for income above $94,300. But we typically have the standard deduction. For 2024 it's $29,200.

So, does this mean we are only taxed 22% for income above $123,500?

I am thinking to do our best to stay under $123,500 in federal taxable income if this is the case.

Thanks for any feedback.

Essentially. The marginal tax rate of 22% kicks in for TAXABLE income above $94,300.

Another way to think of it is there is a zero tax rate on your first $29,200 of adjusted gross income. Then the next 70K or so is taxed at 12%. Then the 22% rate kicks in for the next $100k or so. And then the 24% rate. And so on.

[Anonymous]

Anonymous wrote:The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

That was deliberate policy to “simplify” the tax code.

I know, I know …

[Anonymous]

Anonymous wrote:

Anonymous wrote:The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

This is us. We ran the numbers on standard v itemizing when deciding about mortgage amount. Taking out a larger mortgage in order to itemize barely saved us any money in income tax and increased what we were paying in interest.

When we refinanced mortgage about 3 years back (2% 15 yr mortgage, 400K principal) it essentially moved us to standard deduction.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

That was deliberate policy to “simplify” the tax code.

I know, I know …

There was promises and discussion to raise the limit, but it never happened.
I know, I know....

[Anonymous]

Anonymous wrote:

Anonymous wrote:The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

That was deliberate policy to “simplify” the tax code.

I know, I know …

😬
This was deliberate policy to stick it to blue states with generally much higher priced real estate, which brings with it much higher property tax which gave blue states much more to deduct. But, I get it, this isn't a political thread.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The 10K SALT tax deduction limit on itemization pushed a lot of folks to take the standardized deduction.

That was deliberate policy to “simplify” the tax code.

I know, I know …

😬
This was deliberate policy to stick it to blue states with generally much higher priced real estate, which brings with it much higher property tax which gave blue states much more to deduct. But, I get it, this isn't a political thread.

Oh you are absolutely right. I should have said under the guise of simplifying.

Although it does in fact simplify

I just dispute the notion that taxes should be inherently simple. It stands to reason they should be as complex as the rest of your finances.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If we are married filing jointly, I see that we are typically in the 22% marginal tax rate. For 2024 22% starts for income above $94,300. But we typically have the standard deduction. For 2024 it's $29,200.

So, does this mean we are only taxed 22% for income above $123,500?

I am thinking to do our best to stay under $123,500 in federal taxable income if this is the case.

Thanks for any feedback.

Essentially. The marginal tax rate of 22% kicks in for TAXABLE income above $94,300.

Another way to think of it is there is a zero tax rate on your first $29,200 of adjusted gross income. Then the next 70K or so is taxed at 12%. Then the 22% rate kicks in for the next $100k or so. And then the 24% rate. And so on.

Op here. Thanks.

We are thinking put enough into 403b and/or 457b to get us right below $123,500 federal taxable. Then focus on Roth IRA's. That way any money going into the Roth is taxed at 12% first.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If we are married filing jointly, I see that we are typically in the 22% marginal tax rate. For 2024 22% starts for income above $94,300. But we typically have the standard deduction. For 2024 it's $29,200.

So, does this mean we are only taxed 22% for income above $123,500?

I am thinking to do our best to stay under $123,500 in federal taxable income if this is the case.

Thanks for any feedback.

Essentially. The marginal tax rate of 22% kicks in for TAXABLE income above $94,300.

Another way to think of it is there is a zero tax rate on your first $29,200 of adjusted gross income. Then the next 70K or so is taxed at 12%. Then the 22% rate kicks in for the next $100k or so. And then the 24% rate. And so on.

Op here. Thanks.

We are thinking put enough into 403b and/or 457b to get us right below $123,500 federal taxable. Then focus on Roth IRA's. That way any money going into the Roth is taxed at 12% first.

This is pretty dumb.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If we are married filing jointly, I see that we are typically in the 22% marginal tax rate. For 2024 22% starts for income above $94,300. But we typically have the standard deduction. For 2024 it's $29,200.

So, does this mean we are only taxed 22% for income above $123,500?

I am thinking to do our best to stay under $123,500 in federal taxable income if this is the case.

Thanks for any feedback.

Essentially. The marginal tax rate of 22% kicks in for TAXABLE income above $94,300.

Another way to think of it is there is a zero tax rate on your first $29,200 of adjusted gross income. Then the next 70K or so is taxed at 12%. Then the 22% rate kicks in for the next $100k or so. And then the 24% rate. And so on.

Op here. Thanks.

We are thinking put enough into 403b and/or 457b to get us right below $123,500 federal taxable. Then focus on Roth IRA's. That way any money going into the Roth is taxed at 12% first.

Ummm, real question: are y'all anti-government extremists? Because jerry rigging things to this extent to avoid taxes shows ... unusual priorities.