200k threshold: taxes?

[Anonymous]

This year we're going to make more than 200k. I've read several places that crossing the 200k line has an impact on taxes, what you can claim/receive, what's taken out, etc. I can't claim to understand this at all, I don't really understand taxes in general!

What i'm wondering, is there anything we should do this year to avoid a painful tax season next year? This year we got about 1k state and 2k federal back; it didn't seem like we really benefitted much from the credits (child care, dependents). We do own our home, put money into 529s and retirement accounts (9% of my federal salary into TSP; about 6% of DHs salary into his state retirement account). Should we up the amounts taken out from our pay check? Put more into retirement? Any suggestions?

[Anonymous]

Max out retirement, use flex accounts if available
At some level the AMT hits you, so....

[Anonymous]

Sign up for a health care flexible spending account if available.

[Anonymous]

Anonymous wrote:Max out retirement, use flex accounts if available
At some level the AMT hits you, so....

AMT only hits you depending one what deductions you take. We make $240k and have never had to pay it. (Of course that just means we pay enough in taxes anyway).

To OP-some deductions (student loan interest for example) phase out at higher incomes. But it's not a bright line when you cross $200k gross because it will be based on your adjusted income after factoring in deductions. Other deductions (mortgage, charitable, etc) do not phase out. If you're crossing the 200 mark after having made a slightly smaller amount last year, you probably won't see major differences. If your income increased dramatically you may notice some things changing.

If you want to avoid owing at tax time, I suggest using the IRS's withholding calculator. You'll need copies of your pay stubs and an idea of what you'll pay in mortgage interest, property taxes, etc. they'll tell you how to set your withholding so that you neither owe a lot nor get a huge deduction.

If you want to reduce your tax burden, then maxing out retirement is the easiest option. In the future dependent care anD health care FSAs can help as well.

[Anonymous]

What is AMT? Not that I probably ever need to worry - lol

[Anonymous]

Anonymous wrote:What is AMT? Not that I probably ever need to worry - lol

Alternative Minimum Tax - its complicated and no way around it after you reach a certain income level....which is very easy to do around here.