Reply to Federal tax question - are we just in the spot that is really painful?

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Reply to "Federal tax question - are we just in the spot that is really painful?"

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[quote=Anonymous]To answer your basic question:

Yes, you are in the band that gets hit the hardest. People below you enjoy lower marginal rates, and the truly wealthy generally have different sources of income (i.e. capital gains) subject to lower rates and manipulation.

Two GS 15s earn a little under $300,000 depending on what step, right? This is all wage income.

Since you refinanced your mortgage, I would reckon you're in the 2.5% range now, right? You don't say what size, but call it a $500,000 mortgage. That will generate around $12,000 in deductible interest in the early years, give or take.

Add $8,000 in property tax and $15,000 in DC income tax and you've got $35,000 in deductions. Add another $5,000 in charitable giving and you're at $40,000.

That leaves you with $260,000 of taxable income. Which is in the 33% marginal tax bracket (so, basically $55,765 in tax on the first $226,850, plus 33% on the remaining $33,150). Give or take.

Plus you each have FICA tax on nearly all of your wages.

The only ways you would have to reduce the tax really would be to earn less, max out your 401K plans at work, make more charitable donations.

This is the price of being a wage slave.

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