I took another look at this and i noticed a problem: it should be totalTaxes/AGI=.107=11% taxes (big number on the bottom!)
This year i made 20k more than last year and totalTaxes/AGI=16%
If i calulate totalTaxes/TaxableIncome (taxableIncome is AGI-deductions) i get 14% for 2004 taxes, and 19% for 2005.
So given that i have very simple taxes (401k, negligible cap gains/dividends/interest, standard deduction, rent, single) are these numbers about average? Is Rolo right that you can get by with 6% taxes in the US? What are your numbers?
FYI, i might be naive, but according to the IRS (http://www.irs.gov/formspubs/article/0,,id=133517,00.html) i should be paying roughly between 15% and 25% since i am in the less than 72k bracket. This is supported by my numbers.
--Matthias
Sat Mar 25, 2006 10:21 pm
coaster Senior Advisor
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Matthias, I think the numbers you came up for yourself are typical. Rolo will have to speak for himself as to his numbers.
~Tim~
Sat Mar 25, 2006 10:29 pm
mlathe Contributing Member
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thanks...
second question... How is it possible for someone to pay no taxes?... You know the story about the rich person with a savvy tax advisor paying less than the average joe.
Sat Mar 25, 2006 10:59 pm
coaster Senior Advisor
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Well, I think that story about the savvy rich person paying less is that he's paying less as a percentage of his income. If there are enough deductions to offset the income and enough credits to offset the taxes, then it's possible. Might also be someone who is self-employed whose business expenses exceeded income. There are different scenarios.
~Tim~
Sat Mar 25, 2006 11:36 pm
JBendar Senior Member
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quote:Originally posted by mlathe thanks...
second question... How is it possible for someone to pay no taxes?... You know the story about the rich person with a savvy tax advisor paying less than the average joe.
Matthias:
As a former IRS Agent in the Manhattan district, there are very few occasions of individuals paying no taxes. The IRS has guidelines for every income level, and if you don't fall into their guidelines, it is an open invitation for a tax audit. Some people think that they can fool the IRS. Maybe that is so, but if the IRS starts to investigate an individual for fraud they can go back indefinitely. This is not to scare you, but it is just something to think about. The wealthy people have all sorts of ways to find how to avoid paying taxes. There are tax shelters, setting up certain kinds of corporations, etc. It is not worth thinking about, because it waves a red flag to the IRS. IMO the best thing for everyone is to have a flat tax where everyone pays their fair share and there are no loopholes. It will not work at the present time because there are too many special interest lobbys around.
JBendar
Sun Mar 26, 2006 5:36 am
financechoices Senior Member
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Bugger me, I should move to America. If you lived here in Britain you'd be taxed at 40%!
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mlathe note that single with taxable income between $29,700-71,950 pays 25% of any extra dollar made (except long term capital gains). It also means that every $1000 you contribute to your 401k is only costing you $750, but will grow (compound) as a $1000 investment (to be taxed at an unknown future rate when withdrawn). If you also put something in a Roth IRA, the contribution has no tax deduction, but gains are not taxed if held long enough to be qualified. Doing both might result in a lower tax bracket at retirement, and lump sums could be drawn from the Roth IRA at that time without affecting taxes.
Tue Mar 28, 2006 6:36 am
Moon Pie Member
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quote:Originally posted by financechoices Bugger me, I should move to America. If you lived here in Britain you'd be taxed at 40%!
If you insist. Just joking. Before you move, check this out.
It looks like they lumped Canada and the US together. Canada's used to be more like the UK's. Also, look at the difference after they factor in the mortgage interest deduction.
Just joking. Before you move, check this out.