As someone whose AGI was to high to qualify for education credit (my wife is doctoral student and I spent $2K on my professional development last year) or child credit (and I have three kids) due to the money I made on a side I feel your frustration. My back of the envelope calculation shows that I got to keep about 30 cent of each $ I earned on a side, partially due to poor tax planning.
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I think you did your calculation wrong. I just went through about 10 different scenarios using the facts you provided, and can’t get that number any lower than 42 cents of each dollar. And that’s with including all of your side income subject to self-employment tax, which is unlikely. Probably ought to check your math.[/quote]
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.
