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Random tax question, please....

Random tax question, please....

Old Sep 16th 2012, 5:24 pm
  #1  
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Default Random tax question, please....

Situation A
Married filing jointly no kids. Claiming Standard deduction ($11.7K?)

Situation B
Married filing jointly no kids.
Have a mortgage
1. Interest on mortgage roughly 1,700 a month
2. Donations 900 a year
3. Personal car total DMV fees roughly 200 a year
4. Payping 7K California tax, 18K federal, 4.5K SS, 1.8K medicare, 1K CA CDI

Question. Situation A is straight, I get 11.7K deduction. In situation B, how much deduction can I get? Are there any other itemized deduction we can take?

Thanks in advance
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Old Sep 16th 2012, 6:39 pm
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Default Re: Random tax question, please....

Get yourself a copy of Schedule A (and instructions) from irs.gov. It's fairly short and sweet.

But situation B is clearly going to win.
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Old Sep 16th 2012, 6:53 pm
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Default Re: Random tax question, please....

Originally Posted by E3only View Post
Are there any other itemized deduction we can take?

Thanks in advance
You can also deduct property taxes.

On the car, you can only deduct the registration fee.
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Old Sep 16th 2012, 7:05 pm
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Default Re: Random tax question, please....

Everyone's situation is different but we have always, in twenty five plus years of filing, taken the standard deduction and not bothered with itemizing. Probably because since our house cost us $50,000, even when we had a mortgage it was peanuts, and our property taxes are not much either. You simply have to go through all possible deductions and see how you fare.
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Old Sep 16th 2012, 7:08 pm
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Default Re: Random tax question, please....

Originally Posted by Sally Redux View Post
You can also deduct property taxes.

On the car, you can only deduct the registration fee.
Thanks both. I am a little dummy on how to read these tax instructions.

So I can deduct
1700 a month interest
600 a month property taxes
900 a year of donations (?)
registration fee, not sure how much let's say 100 a year
I think the state taxes I pay is around 5000 a year

So that would be 1700*12+600*12+900+100+5000 = 33,600 minus 11700 which I was getting without itemizing. So the incremental deductions are 21,900...

Am I remotely right / doing this right?
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Old Sep 16th 2012, 7:37 pm
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Default Re: Random tax question, please....

Originally Posted by E3only View Post
Thanks both. I am a little dummy on how to read these tax instructions.

So I can deduct
1700 a month interest
600 a month property taxes
900 a year of donations (?)
registration fee, not sure how much let's say 100 a year
I think the state taxes I pay is around 5000 a year

So that would be 1700*12+600*12+900+100+5000 = 33,600 minus 11700 which I was getting without itemizing. So the incremental deductions are 21,900...

Am I remotely right / doing this right?
That is pretty close for federal income taxes but you can not deduct state taxes on state tax returns.
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Old Sep 16th 2012, 8:43 pm
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Default Re: Random tax question, please....

Originally Posted by E3only View Post
Thanks both. I am a little dummy on how to read these tax instructions.

So I can deduct
1700 a month interest
600 a month property taxes
900 a year of donations (?)
registration fee, not sure how much let's say 100 a year
I think the state taxes I pay is around 5000 a year

So that would be 1700*12+600*12+900+100+5000 = 33,600 minus 11700 which I was getting without itemizing. So the incremental deductions are 21,900...

Am I remotely right / doing this right?
What it is worth to you depends on the tax band into which your income falls.
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Old Sep 16th 2012, 9:00 pm
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Default Re: Random tax question, please....

Doesn't Turbo Tax and similar software tell you which way to go anyway?
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Old Sep 17th 2012, 12:03 am
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Default Re: Random tax question, please....

Originally Posted by Michael View Post
That is pretty close for federal income taxes but you can not deduct state taxes on state tax returns.
Thanks, all.

So can I say (roughly) the incremental tax deduction....

Federal taxes = (33,600-11700) * my average tax rate
State taxes = (33,600-11700- 5,000) * my average tax rate?
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Old Sep 17th 2012, 12:17 am
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Default Re: Random tax question, please....

Originally Posted by E3only View Post
Thanks, all.

So can I say (roughly) the incremental tax deduction....

Federal taxes = (33,600-11700) * my average tax rate
State taxes = (33,600-11700- 5,000) * my average tax rate?
Beware of the Alternative Minimum Tax. If you do too well with itemizing may get caught there.
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Old Sep 17th 2012, 12:49 am
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Default Re: Random tax question, please....

Originally Posted by paddingtongreen View Post
Beware of the Alternative Minimum Tax. If you do too well with itemizing may get caught there.
Tell me more...?
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Old Sep 17th 2012, 2:09 am
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Default Re: Random tax question, please....

Originally Posted by E3only View Post
Thanks, all.

So can I say (roughly) the incremental tax deduction....

Federal taxes = (33,600-11700) * my average tax rate
State taxes = (33,600-11700- 5,000) * my average tax rate?
I'm not sure what you are asking? What are all the numbers you gave?

Use the following tax calculator to determine your approximate federal tax. The deductions are deductions from income prior to calculating taxes and not tax credits.

http://www.dinkytown.net/java/Tax1040.html

Below the calculator are the marginal tax brackets which indicates what percentage each portion of your income is taxed after deductions and exemptions are taken. Therefore the percentage saved for each dollar of deduction is the percentage given in the highest tax bracket on your taxable income. Therefore if your income after deductions and exemptions is $120,000 (marginal tax bracket 25% for married filing jointly), you'll save 0.25 per dollar for deductions taken (part could possibly be 28% or more if you had more than $22,700 of deductions.

Alternate minimum tax (AMT) shouldn't have any effect unless you income is very high and deductions are very large.
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Old Sep 17th 2012, 2:51 am
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Default Re: Random tax question, please....

Originally Posted by Michael View Post
I'm not sure what you are asking? What are all the numbers you gave?

Use the following tax calculator to determine your approximate federal tax. The deductions are deductions from income prior to calculating taxes and not tax credits.

http://www.dinkytown.net/java/Tax1040.html

Below the calculator are the marginal tax brackets which indicates what percentage each portion of your income is taxed after deductions and exemptions are taken. Therefore the percentage saved for each dollar of deduction is the percentage given in the highest tax bracket on your taxable income. Therefore if your income after deductions and exemptions is $120,000 (marginal tax bracket 25% for married filing jointly), you'll save 0.25 per dollar for deductions taken (part could possibly be 28% or more if you had more than $22,700 of deductions.

Alternate minimum tax (AMT) shouldn't have any effect unless you income is very high and deductions are very large.
Thanks.

Let me explain my numbers. As I said in my first post - all I am trying to do is to calculate incremental tax deduction between situation A and B.

You thought that 33,700 exemptions looks about right but rightly pointed out that that's not the case for State.

So I just put two sets of data

For Federal it will be entire 33,700 minus the 11,700 I am claiming under situation A
For State it will be 33,700 minus State taxes (as I don't get to state tax deduction for State taxes if that makes sense) minus the 11,700 I am already claiming under situation A.

[I assume that the 11,700 standard deduction is taken for State and Federal returns?]

The above 2 gives me 'incremental deductions' and I understand it's not tax credit but the tax benefit is dependant on my tax bracket. I just wanted to quantify incremental tax deductions that's all.

Does that make sense?
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Old Sep 17th 2012, 2:54 am
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Default Re: Random tax question, please....

Originally Posted by Michael View Post
Alternate minimum tax (AMT) shouldn't have any effect unless you income is very high and deductions are very large.
... and even if you do end up having to pay AMT you will still be much better off that you would have been had you just taken the standard deduction ...

In other words, the possibility that you might be liable for AMT does not mean that you shouldn't itemize - it is just something that you need to be aware of.
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Old Sep 17th 2012, 3:02 am
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Default Re: Random tax question, please....

Originally Posted by E3only View Post
Thanks.

Let me explain my numbers. As I said in my first post - all I am trying to do is to calculate incremental tax deduction between situation A and B.

You thought that 33,700 exemptions looks about right but rightly pointed out that that's not the case for State.

So I just put two sets of data

For Federal it will be entire 33,700 minus the 11,700 I am claiming under situation A
For State it will be 33,700 minus State taxes (as I don't get to state tax deduction for State taxes if that makes sense) minus the 11,700 I am already claiming under situation A.

[I assume that the 11,700 standard deduction is taken for State and Federal returns?]

The above 2 gives me 'incremental deductions' and I understand it's not tax credit but the tax benefit is dependant on my tax bracket. I just wanted to quantify incremental tax deductions that's all.

Does that make sense?
Use the calculator to calculate taxes using the standard deduction and then with deductions and that will be the amount saved. The numbers have no meaning without your income, exemptions, and possibly tax credits (probably none available in your case). Also if you have capital gains and/or qualified dividends, those are taxed at a lower rate at the federal level.

The following is a tax calculator for the state of California.

https://www.ftb.ca.gov/online/Tax_Calculator/

So try the tax calculators first.
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