1. Colby

    Ed, you are a saint! Quick question for you. I am MFJ with 4 kids. According to your calculations I can make $70,917 with $0 taxes owed.

    My question is if I can’t get down to that amount for my AGI, what marginal tax bracket do I fall into moving forward? Base salary is $130k and by maxing out 401k, HSA, and IRA I will have a taxable income of roughly $94,100.

    Were is the remaining $23,183 taxed? Sorry I am a bit naive to this, but trying to figure it out!

    Thanks for your help, and spreading the knowledge!

    • Colby, the 15% tax range in 2018 will begin at $19,051 and end at $77,400. That’s an amount of $58,350 beyond the 10% tax bracket. You should still have $18,667 at the 15% tax rate ($58,350 – $39,683), right? That money will be taxed at 15%, so you’ll owe $2,800 on that amount, but you’ll also have some income taxed at the 25% rate (don’t kill the messenger!). How much? $4,516 ($23,183 – $18,667) with a tax liability of $1,129. Total taxes due should be $3,929 for an effective tax rate of 3% ($3,929 / $130,000). Not bad, huh?

      KEEP IN MIND, I am not a CPA, accountant, or financial expert of any sort. I am an unemployed underwear blogger (and no, I don’t write about underwear). Thanks for reading. Ed

        • Woops, it seems I got that number from MFJ + 5 kids, so I’m off with my numbers. That should be $33,017 (please verify for me). So, $58,350 – $33,017 = $25,333 of 15% money left. Your $23,183 will be taxed at 15% for a bite of $3,477 for an effective tax rate of 2.67% ($3,477 / $130,000). Boy, I sure hope that’s correct…I’m obviously no tax guru. Please check my math to make sure it work. Thanks for bringing this to my attention. Ed

    • ElleX,
      That just proves to me that you’re human! It honestly seems that I have to relearn this stuff each tax year. Taxes are not always intuitive or logical, are they? As for the 10% bracket for a MFJ, it’s $19,050 of money at 10%. However in our case we have a kid, so we get a $1k child-tax credit. If we take $19,050 beyond our free money amount, we’ll owe $1,905 of federal income tax, right? Now, this is where our child-tax credit comes into play and wipes away $1k of our income tax owed. After that, we owe only $905. Sorry for any confusion, taxes confuse me too. I hope this helped. Ed

  2. Thanks for this great info! I only wish I would have found it last year too.

    Quick question … we are MFJ with 3 kids. Can you explain why on the credits it is $26,350 instead of $30,000?

    I am sure it is obvious but for some reason I am having a hard time understanding it.


    • Hello John, the 10% bracket ends at $19,050 with a tax bill of $1,905, right? So, you’ve more than got that covered with your first child tax credits ($2,000). However, you still have $1,095 of credit left in the 15% bracket. How much does that free money does that amount provide ($1,095 / .15)? $7,300 on top of the 10% bracket of $19,050 = $26,350. Does that help? Ed

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