Deductions!

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g$$
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Deductions!

Post by g$$ »

I'm looking for extra deductions before the year is over. Any help is appreciated!

Tax filing status: single
Debt: 20,000 student loans at 2.75%
Tax Rate: 28.0% Federal, 9.3% State
State of Residence: CA
Age: 29

Taxable income in 2014:
125,000 total Income (includes wages, bonus, and some short term capital gains)
-17,500 for 401(k)
- 3,300 for HSA
- 3,950 for personal exemption
- 8,000 for itemized deduction (state taxes withheld)
92,250 taxable income

The 28% federal tax bracket starts at $89,350. Is there some way to get my taxable income below this threshold? Any suggestions to get that extra $3,000 deduction? Feels like the only way to get there is with a mortgage :confused .

Seems like I've finally made the transition to the 28% federal tax bracket :annoyed. If you've got any suggestions for year-end deductions, please feel free to post them here.

-g$$
Last edited by g$$ on Sat Dec 13, 2014 12:00 am, edited 1 time in total.
DSInvestor
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Re: Deductions!

Post by DSInvestor »

Taxable Income = AGI - deductions - exemptions.

For 2014, each exemption is $3950.

Have you run some numbers with taxcaster?
https://turbotax.intuit.com/tax-tools/
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johnreese
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Re: Deductions!

Post by johnreese »

Your effective tax rate isn't actually 28%. You're only paying 28% federal on the amount over $89K. For the amount under $89K, you're paying 10-25%. See: http://en.wikipedia.org/wiki/Income_tax ... s_2013.png

Is there a specific reason you're aiming for a specific bracket? I'm not from CA so I'm not too sure about it's tax regulations, but aiming for a specific bracket is only useful in very limited cases (ex. in NH if you earn less than $50K per year you don't have to pay any state business tax, but if you earn a few dollars over, then you'll have to pay business tax on the entire amount).
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Epsilon Delta
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Re: Deductions!

Post by Epsilon Delta »

1) Harvest any capital losses.
2) Are you properly withheld for state tax? If you'll owe in April an estimated tax payment is deductible this year.
3) Charitable deductions.
4) There's still over two weeks to get married.
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g$$
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Re: Deductions!

Post by g$$ »

DSInvestor wrote:Taxable Income = AGI - deductions - exemptions.

For 2014, each exemption is $3950.

Have you run some numbers with taxcaster?
https://turbotax.intuit.com/tax-tools/
You're right. I I'll fixed it above with an edit.

Yah, I played around with taxcaster earlier today. Is it just me or is there no where to enter 401(k) and HSA contributions? I adjusted my total income manually.
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cheese_breath
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Re: Deductions!

Post by cheese_breath »

If you have any thoughts of getting married soon , do it before the end of the year to someone with zero income. You'll get another $3950 exemption plus a $12,200 standard deduction.
The surest way to know the future is when it becomes the past.
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g$$
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Re: Deductions!

Post by g$$ »

Maybe I could get pregnant and have a baby too. :)
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Epsilon Delta
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Re: Deductions!

Post by Epsilon Delta »

g$$ wrote:Maybe I could get pregnant and have a baby too. :)
It's too late for 2014. If you want the extra exemption next year you'll want to get started by April 15th at the latest.
expat
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Re: Deductions!

Post by expat »

g$$ wrote:
Seems like I've finally made the transition to the 28% federal tax bracket :annoyed. If you've got any suggestions for year-end deductions, please feel free to post them here.

-g$$
You're only paying 28% on the part over $89,350.

(92,250-89,350) * (.28-.25) = $87.00 more in taxes
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g$$
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Re: Deductions!

Post by g$$ »

expat wrote:
g$$ wrote:
Seems like I've finally made the transition to the 28% federal tax bracket :annoyed. If you've got any suggestions for year-end deductions, please feel free to post them here.

-g$$
You're only paying 28% on the part over $89,350.

(92,250-89,350) * (.28-.25) = $87.00 more in taxes
I'm aware that it's a marginal rate. I'd still like to avoid the extra 3% tax on each new $1.00 earned.
lululu
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Re: Deductions!

Post by lululu »

You're probably below the threshold for medical on schedule A, but if not, note you can include glasses, dental, and mileage driven to doctors' appointments. Another vote also for increasing charitable donations.

I've forgotten how the contribution rules work for 401Ks and IRAs. Can you toss money into an IRA?
qui
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Re: Deductions!

Post by qui »

lululu wrote:I've forgotten how the contribution rules work for 401Ks and IRAs. Can you toss money into an IRA?
Contribute, sure. Deduct, no. http://www.irs.gov/Retirement-Plans/Pla ... an-at-Work

Roth IRA would still be on the table though.
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cheese_breath
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Re: Deductions!

Post by cheese_breath »

Epsilon Delta wrote:
g$$ wrote:Maybe I could get pregnant and have a baby too. :)
It's too late for 2014. If you want the extra exemption next year you'll want to get started by April 15th at the latest.
You need a fast lane to an adoption.
The surest way to know the future is when it becomes the past.
JDDS
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Re: Deductions!

Post by JDDS »

g$$ wrote:
expat wrote:
g$$ wrote:
Seems like I've finally made the transition to the 28% federal tax bracket :annoyed. If you've got any suggestions for year-end deductions, please feel free to post them here.

-g$$
You're only paying 28% on the part over $89,350.

(92,250-89,350) * (.28-.25) = $87.00 more in taxes
I'm aware that it's a marginal rate. I'd still like to avoid the extra 3% tax on each new $1.00 earned.
Make less? FWIW I know people who would like to have this problem.
I'm guessing you're not eligible for one of the education related tax breaks?
That's the only thing coming to mind that hasn't already been mentioned.
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cheese_breath
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Re: Deductions!

Post by cheese_breath »

JDDS wrote:
g$$ wrote:
expat wrote:
g$$ wrote:
Seems like I've finally made the transition to the 28% federal tax bracket :annoyed. If you've got any suggestions for year-end deductions, please feel free to post them here.

-g$$
You're only paying 28% on the part over $89,350.

(92,250-89,350) * (.28-.25) = $87.00 more in taxes
I'm aware that it's a marginal rate. I'd still like to avoid the extra 3% tax on each new $1.00 earned.
Make less? FWIW I know people who would like to have this problem.
I'm guessing you're not eligible for one of the education related tax breaks?
That's the only thing coming to mind that hasn't already been mentioned.
Or maybe you could consider $87 a small price to pay for bragging rights to being in the 28% bracket? I'd pay $87 to push my income up to that bracket.
The surest way to know the future is when it becomes the past.
MathWizard
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Re: Deductions!

Post by MathWizard »

Prepay charitable pledge for 2015
prepay property tax
We bunch deductions from two years
and use standard deduction every other year.

Can you contribute more to HSA?
For next year can you do a flex account
for some medical bills if you have an HSA?
Sidney
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Re: Deductions!

Post by Sidney »

MathWizard wrote:Can you contribute more to HSA?
OP is at the maximum for a single taxpayer.
I always wanted to be a procrastinator.
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bertilak
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Re: Deductions!

Post by bertilak »

I didn't read al the above but this may be a repeat.

If you go to a doctor you can claim car mileage. Each mile is 23.5 cents. For example if you live 35 miles out of town then every doctor visit is 70 miles. If you and your spouse each go 4 times a year thats $560. This is close to my situation.

Of course if you are single and you take the 3rd avenue bus to your one and only doctor visit each year forget it!
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peppers
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Re: Deductions!

Post by peppers »

g$$ wrote:Maybe I could get pregnant and have a baby too. :)
Or, get married. Find a spouse with 6 dependents*

*This assumes of course, that your new spouses' ex-spouse is no longer with us.
"..the cavalry ain't comin' kid, you're on your own..."
TIAX
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Re: Deductions!

Post by TIAX »

Make a very large contribution to Total International Index by December 18 to get the foreign tax credit.
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Electron
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Re: Deductions!

Post by Electron »

I would make an estimate of my 2014 California income taxes and see if the current withholdings cover the taxes. If not you can make an estimated payment before December 31 to increase your itemized deductions. You can also overpay although that would have some impact on 2015 taxes.

Also look for any overlooked itemized deductions and see if any capital losses would be available this year. I would not be very concerned about the extra $87.00.
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tomd37
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Re: Deductions!

Post by tomd37 »

Bertilak,
That's 560 miles @ $0.235 which equates to $131.60 for mileage deduction.
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bertilak
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Re: Deductions!

Post by bertilak »

tomd37 wrote:Bertilak,
That's 560 miles @ $0.235 which equates to $131.60 for mileage deduction.
oops! :oops:

No wonder it came out eter than I thought it would!
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Aptenodytes
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Re: Deductions!

Post by Aptenodytes »

Why do you care? Three percentage points on $3k?
letsgobobby
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Re: Deductions!

Post by letsgobobby »

Charity
Longdog
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Re: Deductions!

Post by Longdog »

Epsilon Delta wrote:
g$$ wrote:Maybe I could get pregnant and have a baby too. :)
It's too late for 2014. If you want the extra exemption next year you'll want to get started by April 15th at the latest.
That is cutting it close. You might have to induce labor to guarantee your bundle of joy/extra tax deduction arrives before midnight, Dec. 31.

Making a deductible contribution to a tIRA and donating to charity seem to be your best and easiest options at this point, if you haven't already done them.

You could also take time off without pay for the rest of the month, if your employer allows it.
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Electron
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Re: Deductions!

Post by Electron »

The Deductible IRA would be an excellent idea but I believe taxable income in this case is over the Deductible IRA threshold.

It looks as though income exceeds the top of the 25% bracket by $2900. I estimate California income taxes at a little over $7135 before exemption credit. Unless state withholdings are quite low it may not be practical to get much of an additional deduction with an estimated payment. You can pay more and get a larger deduction if a refund in 2015 is not a concern. A refund would be Federal taxable income in 2015.

Note that charitable deductions may be cash, household items, or even a vehicle. I would also review all income sources carefully in terms of savings interest or a state tax refund. On the itemized deductions, a portion of any vehicle registration costs should be tax deductible.
Last edited by Electron on Mon Dec 15, 2014 12:41 pm, edited 1 time in total.
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The Wizard
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Re: Deductions!

Post by The Wizard »

Make an additional $3000 estimated payment toward your CA state income tax.
But any refund of that state tax will be additional income for 2015...
Edit: already stated by electron, I see...
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Aptenodytes
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Re: Deductions!

Post by Aptenodytes »

I still say it is illogical to care significantly more about a 28% deduction than a 25% deduction.
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Re: Deductions!

Post by The Wizard »

Aptenodytes wrote:I still say it is illogical to care significantly more about a 28% deduction than a 25% deduction.
I agree.
With the OP's decently good income, would be more useful to focus on long-term savings percentage.
Is OP up to 30% of gross yet?
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Electron
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Re: Deductions!

Post by Electron »

g$$ wrote:Debt: 20,000 student loans at 2.75%
8,000 for itemized deduction (state taxes withheld)
92,250 taxable income
It has not been mentioned but student loan interest is not deductible if income is above a certain limit. In this case, the deduction is phased out with MAGI between $60K and $75K.

If the $8000 itemized deduction includes only state taxes the amount may already be over the state income tax obligation for 2014.
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LeeMKE
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Re: Deductions!

Post by LeeMKE »

+ 1

Charitable contributions. Good time of year to clean out the closets, and pare down the sporting goods you don't use any longer. Musical instruments in the closet? Time is too short to get a pickup of furniture, and single guys don't usually accumulate furniture. But an extra set of golf clubs? A bike you haven't used for 3 years?
The mightiest Oak is just a nut who stayed the course.
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