Submitted by agm_93 t3_yi2eu5 in personalfinance
agm_93 OP t1_iugwybz wrote
Reply to comment by AloneWithFood in Can I use past expenses as a tax deduction? by agm_93
Gotcha so is it correct to assume a $1k item in this instance would end up costing $700 due to the reduced income that would be taxed?
AloneWithFood t1_iugx8al wrote
You can look at it that way. But you need to find out what percentage of taxes you are paying to get an accurate formula
agm_93 OP t1_iugxur6 wrote
nozzery t1_iugyzi7 wrote
You need to actually do a model using either a tax calculator or tax software
AloneWithFood t1_iuh13mz wrote
10% for individual income of $9,875 or less ($19,750 if married filing jointly) 12% for individual income over $9,875 ($19,750 if married filing jointly) 24% for individual income over $40,125 ($80,250 if married filing jointly) 32% for individual income over $85,525 ($171,050 if married filing jointly)
What this means is for the first $9,875 earned you pay 10% tax. Then for income earned $9,876-$40,125 you pay 12%. And so on and so on.
So if you earned $85,525 you won't pay exactly 32% taxes because for the first 9.8k you paid 10% and for the rest up to 40k you paid 24% and so on.
I__Know__Stuff t1_iuhunig wrote
But the tax savings from deducting an expense is at the marginal rate, not the average rate.
AloneWithFood t1_iuic33y wrote
If op earned 87k and deducted 1k then his income would be 86k. He would not pay the 32% taxes on that 1k deduction. Correct?
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