Wednesday, March 5, 2008
Gaming the Taxable Income
The truth is out. I have learned what those those mysterious things called "tax brackets" are. They are shown here. Bring on the gaming of the tax system.
Here's the issue:
Imagine if you and your spouse make 130,000 combined. Then you get a huge raise and next year make 134020.
This means that the government will tax you an extra 3% and then you'd be back to making only 130,000 again.
If there was nothing you can do, it would be fine to just accept it. However, there is something you can do.
You have a several buttons on our game pad you can press throughout the year to change your "Taxable Income." The game you are playing is like Sonic the Hedgehog and the little shiny rings are % of your money you take back from the government. If you don't grab enough rings, it's game over. If you get enough you get a 1Up and free extended play. Only 50 rings is worthless, but 100 gets you something.
There are many buttons your can press. They include:
- Contribute more to a 401k.
- Contribute more to charity.
- Flex spending
- Health plan