Anonymous
04/09/2024 11:36
Subject: When making more actually is a real tax disadvantage?
Anonymous wrote:Anonymous wrote:Do you have a SEP IRA? It’s the easiest way to reduce your tax burden. Also, if you need a housekeeper, then hire one. It’s cheaper than marriage counseling, and if it improves your quality of life, then go for it.
OP here and I appreciate this comment for being news I can use. I have a Roth but not a SEP, but will look into it.
I'm so torn about the house cleaners, it was my big goal for this year and now it feels like a lifestyle overreach. I really want to retire from being out full time housekeeper though, as I get older I resent it more and more. I don't resent DH, specifically (though God knows he could do more, but he dies some and really the issue is I'm cleaning up after DC and the dog all the time), I just resent feeling like the maid in general.
OP, since you own your own business, you can set up an individual 401k. A SEP IRA is a half measure. You can set it up as a Roth if you like, make an employer contribution - it's a great way to significantly ramp up your savings when self-employed.
Anonymous
04/09/2024 11:30
Subject: When making more actually is a real tax disadvantage?
You earned more money so you paid more in taxes (presumably, can’t tell for sure). You’re upset because it was a lot of work to earn the additional money. You have to decide whether the additional money is worth it, or whether you can become more efficient so you can use less of your time on admin and production.
Anonymous
04/09/2024 10:32
Subject: When making more actually is a real tax disadvantage?
You are one of the few who actually run the numbers so good for you. It is often true that if you are the lower earner and can't cover all the associated costs of working including childcare and with consideration of the higher household tax rate, you could be losing money by working for many years. The consideration is "getting off track" if your field requires a consistent career path.
There are the actual numbers during the early years of summer day care and such vs.. the long term considerations...eveyrone's situation is different and you just need to weight your options.
There are the actual numbers during the early years of summer day care and such vs.. the long term considerations...eveyrone's situation is different and you just need to weight your options.
Anonymous
04/09/2024 09:48
Subject: When making more actually is a real tax disadvantage?
This going into higher tax bracket is not just for the amount over, but you may lose some deductions. I lose earned income deduction when I take out over $11k from the market for example.
I know not to go over $50k this year for a different reason. Luckily my job is very flexible and I take summers off to spend with kids.
Being HH and making so little means I barely pay any taxes, but I have heard it being a big junk for middle class.
I let the money grow in the stock market and only take some out if needed.
I know not to go over $50k this year for a different reason. Luckily my job is very flexible and I take summers off to spend with kids.
Being HH and making so little means I barely pay any taxes, but I have heard it being a big junk for middle class.
I let the money grow in the stock market and only take some out if needed.
Anonymous
04/09/2024 08:05
Subject: When making more actually is a real tax disadvantage?
Anonymous wrote:I have always kind of rolled my eyes at people who complained about how earning more "costs" them in terms of taxes. But then this last year we experienced this and when I do the math on it, it really does not make sense.
My DH has a regular job but I am a part-time freelancer. In 2023, he received an 8% raise and I made about 16k more than I had the previous year (so from around 20k to around 36k -- now that our kid is in full-day school I have been able to boost how much I work plus clients are hiring me for more work). As a freelancer, that extra 14k is the result of a real increase in time spent working in a way that a regular raise is not. It actually reflects working basically twice as much in 2023 as in 2022 because not only did I have to bill significantly more to make that money, I also had to put in more unpaid time on developing that business plus the back office stuff I do myself -- invoicing, etc.
Last year we received a total tax refund of about 9k. Since I own my own business we have a lot of deductions, so it adds up.
This year we actually owe a small amount in federal taxes (less than $100, not a big deal) and will get just $500 back on our state refund. We had basically the exact same deductions this year as last, but between my DH's raise and my increased revenue, we bumped up enough in tax obligation that it wipes out more than half of my increase. I think I feel that more acute because, again, it's not like I got a raise for doing the same job. I literally worked twice as much. Having so much of that wiped out by taxes is depressing, especially because I'm trying to build a business from scratch and I'm still in early stages where every penny counts. It's demoralizing and I'm second-guessing my choice to do this even though in terms of my work and clients, the business feels like it's doing fairly well. I also think about how much I spend on childcare in the summer to enable me to do this and when you add that to the tax hit, it feels pointless.
Anyone else been through this? I'm trying to tell myself that I just need to push past it -- look for more ways to structure my taxes intelligently and also keep working to increase my billables. Maybe we just got unlucky in hitting an income level this year where the tax hit was just outsized compared to my income. But I'd love to hear from others who have dealt with similar issues. I'm between projects right now and should be working connections to get another project and instead I find myself wondering if I should take fewer projects this summer, save on childcare costs, and just make less while spending more time with my kid. Is that dumb?
What is dumb is getting such a large tax refund! Don’t set yourself up that way. Paying the IRS too much throughout the year is unwise. A refund $9000 refund isn't actually a refund!
Anonymous
04/09/2024 07:28
Subject: When making more actually is a real tax disadvantage?
It’s your withholding. You should’ve had more withheld then you would’ve gotten a bigger refund. You made 16k more so that’s at me last $4k in federal taxes plus SS, state, etc and he made 8% more. Why do you think you wouldn’t pay taxes on the raises?
Anonymous
04/09/2024 07:19
Subject: When making more actually is a real tax disadvantage?
OP you don’t understand the tax code. Stop digging yourself in deeper insisting that 100% of your increased earnings were used to pay increased tax liability.
Anonymous
04/09/2024 02:18
Subject: Re:When making more actually is a real tax disadvantage?
OP, your problem has nothing to do with taxes. Zero. None.
It seems like despite several clarifications by previous posters, you are still not getting it.
The title of your post should have been:
When working more is not worth it due to childcare costs.
You are working twice more to go from 20k to 36k. But you have to pay 4k extra in childcare costs. So you are making only 12k more.
Working twice to make only 60% more.
That’s your problem right here. It has nothing to do with taxes.
It seems like despite several clarifications by previous posters, you are still not getting it.
The title of your post should have been:
When working more is not worth it due to childcare costs.
You are working twice more to go from 20k to 36k. But you have to pay 4k extra in childcare costs. So you are making only 12k more.
Working twice to make only 60% more.
That’s your problem right here. It has nothing to do with taxes.