Anybody started thinking about how best to manage taxes under this new agreement? Both considering the retro, and just in general likely moving into a higher tax bracket?

I’m admittedly pretty dumb when it comes to this stuff. I generally go to HR Block every year. I withhold a little extra from my check to make sure I don’t owe anything. But this may get expensive pretty quickly.

so how will you handle it? Increased withholding? Pay estimated taxes quarterly? Anybody here smart about this stuff who can explain it simply? Thanks!

 

Oh most definitely I’ve been thinking about it. Will chime in with my thoughts later (since you asked).

 

Explain taxes simply? I want some of what you are smoking!

 

estimate what you will make next year including the retro check. Multiple that entire number by .34. Then figure out how much you are withholding every month and multiply by 12 and add what they withheld from retro. Subtract that number from the first. Then either increase withhold every month to make the number near zero or save that much to pay your taxes. This is a simple as it gets. This way you are not surprised and trying to find $69k to pay your taxes.

yes, multiplying by .34 is a bit much but it keeps the big surprises away.

do not pay taxes quarterly. Just save the money yourself until you have to pay. You have already given SWA a free loan, don’t give Biden one as well.


also, do not sell a house or anything next year that will net you a bunch of money. Your tax liability on it will be greatly reduced in 2025 when you don’t have the retro check jacking up your income.

 

Unless you are moving and use proceeds from sale of primary residence to purchase another primary residence.

 

that exemption has a limit.

They need to make sure you are “paying your fair share!”

If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.

the trick is to keep every receipt for everything you spent improving the house. I had to go back 15 years.

 

I think this is a good technique, albeit a bit conservative.

Once you have a better grip on what next year is going to look like, go to the IRS withholding calculator. Have your paystubs and numbers handy. It will nail it down for you. I use it every year and achieve near zero nirvana each time.

 

Current tax provisions expire at end of 2025. Whether the standard reduction goes back down and itemizing becomes beneficial again remain to be seen.

$383.9k is the top end of the 24% bracket for 2024 (filing joint). Common misconception is your entire income gets taxed at the rate for your bracket. Not true; in a progressive tax, only the dollar amount over the limit of a bracket gets additional tax. It’s too late to do much about 2023, but remember if you owe, it behooves you to pay as late as possible.

Here’s the 2023 taxes for married filing joint (use total income from all sources minus standard deduction $27,700):

Over $364,200 but not over $462,500:
$74,208 plus 32% of the excess over $364,200

Over $462,500 but not over $693,750:
$105,664 plus 35% of the excess over $462,500


If you’ve withheld less than that, take the amount you think you’ll owe and throw it in an interest bearing account until April (or longer if you file an extension). If you’ve overpaid, do your taxes immediately upon getting your W-2 to get your refund.

 

Start an LLC.

LOL

 

yes, buy a house and rent it to yourself then deduct all the expenses. Be sure to hire fake employees, but remember to pay their unemployment insurance. Then wait for the next COVID lockdown and collect Government cheese!!

easy free money.