That’s possible. I assumed 27% federal tax (some was taxed at 25%, some at 28%), 10% CA, $3K credit for three kids, $6K in education expenses for my wife and $2K for me. I had to pay a small fine since I owed $12K, combined.
It felt bad, the side business has little growth potential, I spent most of my ‘free’ time on it and I probably made less than $10/hour, after taxes.[/quote]
Biggest flaw in the calculation is with regards to the education costs. The most you can get is a $2,000 credit or a $4,000 deduction, regardless of how much you spend.
And in order to go from full child tax credits of $1,000 per child to zero, your income has to go up by $20,000 per child. 3 kids, thats $60,000 of additional income needed in order to wipe out the credit entirely. Adds about 5% to your effective tax rate.
27% federal, 10% state, 5% child care credit, 14% effective self employment tax rate, maximum of about 2% for the tuition credits, total of 58%.
