[Finances] Excess Ain’t Rebellion

Well, your CD collection looks shiny and costly.
How much did you pay for your bad Moto Guzzi?
And how much did you spend on your black leather jacket?
Is it you or your parents in this income tax bracket?

This post is not just a blatant excuse to quote one of my favorite Cake songs ever, Rock and Roll Lifestyle. No, in plotting my BENEFITS PACKAGE YAY! I am contemplating how to maximize my pre-tax deductions.

Why? Because pre-tax deductions, if you’re lucky, can drop you into a different tax bracket.

At which point that part of my brain that’s like a three year old always asking questions, well, it asked, “Hey, what income tax bracket are you in now?”


Wikipedia to the rescue!
For 2008, the Federal tax brackets for a single (unmarried) person are:

  • 10%: from $0 to $8,025
  • 15%: from $8,026 to $32,550
  • 25%: from $32,551 to $78,850
  • 28%: from $78,851 to $164,550
  • 33%: from $164,551 to $357,700
  • 35%: $357,701 and above

I never realised exactly how huge the tax brackets were. Now I know.

Now, let’s say you’re looking at that and going, “Mary Sue! I’d need to have something like $20k of deductions to get into a new tax bracket! That’s silly! I’m not going to waste my time looking at my pre-tax deductions!”

Well, it is America, you can totally waste your money if you want to. But let’s do a little speculative math, here.

Let’s say your taxable income is 32,000.

32,000 x 15% = you pay $4800 in income tax.

Now let’s say your employer has Healthcare Spending Accounts, you’re pretty healthy but you still want a new pair of glasses, so you toss $25 in a month. This means your taxable income drops an additional $300 to 31,700

31,700 x 15% = You pay $4755 in income tax

This, kids, is why math is our friend.

If you’re interested in how your payroll department does the math, here’s the PDF file direct from the IRS that tells ’em, uh, how to do the math.

And here’s a State Income Tax Bracket list for all 50, so you can see what your state is at, or what that state you want to move to is at (my sister’s biggest talking point for getting me to move to Florida is no income tax. Because that makes up for the alligators. [/sarcasticfont])

Anyoldway, I’m continuing my policy of not telling youse people how much I make. Because it’s none of your stinkin’ business, so nyah! :p

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