Percentage, Tax Savings
- Thread starter jnargamj
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D
Deleted member 4993
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You say:
I've been saving 30% of my checks which has accrued $8,804.
- in what time span?
Between May and December 2020
I am reluctant to even try answering this question because I suspect that it is so incomplete that any answer will be misleading.
We don’t know whether what was saved was the total amount of three checks out of ten or 30% of the amount of each check. That makes a difference if the checks were for different amounts. I suspect that it was 30% of the amount of each check, but the original post says “checks“ rather than “amount of each check.”
Then it says “should have saved“ $3401, which is very close to one fourth of $8804. It makes me wonder if the numbers are correct. And why is 3401 the correct amount? If this is a question about marginal tax rates, a correct answer will need far more information than we have been given.
We don’t know whether what was saved was the total amount of three checks out of ten or 30% of the amount of each check. That makes a difference if the checks were for different amounts. I suspect that it was 30% of the amount of each check, but the original post says “checks“ rather than “amount of each check.”
Then it says “should have saved“ $3401, which is very close to one fourth of $8804. It makes me wonder if the numbers are correct. And why is 3401 the correct amount? If this is a question about marginal tax rates, a correct answer will need far more information than we have been given.
Thank you for responding.
I received a check every 2 weeks beginning in May. These checks were not taxed, so I set aside 30% of each check. The savings (combined from all checks since May) is now $8804, but, fortunately, I only owe $3401 in taxes. What can I lower the savings percent to?
D
Deleted member 4993
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Did you deposit these savings in an "interest" earning account?
The problem is that, with tax brackets, whatever percentage you save is likely to be wrong because the marginal rate changes as income goes over certain thresholds, which changes the average tax due.
Do you understand?
Now you had only 7 months income last year, and 7.5% would have been almost exactly enough to cover your tax liability, but that percentage may need to be increased to cover 12 months of income.
Here is a page that purports to provide tax bracket information for tax year 2021.
Your 2023 Tax Brackets vs. 2022 Tax Brackets
The income ranges, adjusted annually for inflation, determine which tax rates apply to you
www.aarp.org
Note that this reflects only federal income tax, not state and local income tax.
And all of this changes if the checks you are getting are net of withholding.
To get reliable advice you need an accountant.
Steven G
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I will answer this as a pure math question. I am assuming that each check was the same amount.
Whenever you do not see how to do a problem you should work with friendlier numbers. Suppose you just need to save $4402 which is half of what you did save. Hopefully you can see that the answer to your question (using these numbers) would be 15%.
That is [math]\dfrac{4402}{8804}30% = \dfrac{1}{2}30[/math]% = 15%
Just do the same with your numbers. [math]\dfrac{3401}{8804}30[/math]% = 11.589%
Whenever you do not see how to do a problem you should work with friendlier numbers. Suppose you just need to save $4402 which is half of what you did save. Hopefully you can see that the answer to your question (using these numbers) would be 15%.
That is [math]\dfrac{4402}{8804}30% = \dfrac{1}{2}30[/math]% = 15%
Just do the same with your numbers. [math]\dfrac{3401}{8804}30[/math]% = 11.589%
Thank you. This is exactly what I was looking for.