[SK in CV]

[quote=captcha]

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%.

[SK in CV]

[quote=captcha]

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%.

[SK in CV]

[quote=captcha]

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%.

[SK in CV]

[quote=captcha]

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%.

[SK in CV]

[quote=Aecetia]I think it is going to be difficult to define speculative trading from trading and anything that decreases money invested should work as a brake on what I still consider a fragile recovery. If you can show otherwise, then I would like to see how more transaction tax will stimulate Wall Street.[/quote]

I think the mistake here is the assumption that any stock trading increases the output of the economy. Other than when corporations go to market to raise capital (IPO’s or secondary offerings), it doesn’t. To bring it closer to this blog’s topic, it’s like looking at increased resale activity in the residential real estate market and saying the economy is growing. Other than brokerage commissions, it’s not. When I sell my 1,000 shares of Ford and you buy it, the economy hasn’t gotten any better. If I pay a 1/4 of a point to sell and/or you pay 1/4 of a point to buy, it probably won’t dissuade us from making the trade.

Probably different for day traders. But I think you’d be hard pressed to come up with an argument that that industry improves the economy as a whole.

[SK in CV]

[quote=Aecetia]I think it is going to be difficult to define speculative trading from trading and anything that decreases money invested should work as a brake on what I still consider a fragile recovery. If you can show otherwise, then I would like to see how more transaction tax will stimulate Wall Street.[/quote]

I think the mistake here is the assumption that any stock trading increases the output of the economy. Other than when corporations go to market to raise capital (IPO’s or secondary offerings), it doesn’t. To bring it closer to this blog’s topic, it’s like looking at increased resale activity in the residential real estate market and saying the economy is growing. Other than brokerage commissions, it’s not. When I sell my 1,000 shares of Ford and you buy it, the economy hasn’t gotten any better. If I pay a 1/4 of a point to sell and/or you pay 1/4 of a point to buy, it probably won’t dissuade us from making the trade.

Probably different for day traders. But I think you’d be hard pressed to come up with an argument that that industry improves the economy as a whole.

[SK in CV]

[quote=Aecetia]I think it is going to be difficult to define speculative trading from trading and anything that decreases money invested should work as a brake on what I still consider a fragile recovery. If you can show otherwise, then I would like to see how more transaction tax will stimulate Wall Street.[/quote]

I think the mistake here is the assumption that any stock trading increases the output of the economy. Other than when corporations go to market to raise capital (IPO’s or secondary offerings), it doesn’t. To bring it closer to this blog’s topic, it’s like looking at increased resale activity in the residential real estate market and saying the economy is growing. Other than brokerage commissions, it’s not. When I sell my 1,000 shares of Ford and you buy it, the economy hasn’t gotten any better. If I pay a 1/4 of a point to sell and/or you pay 1/4 of a point to buy, it probably won’t dissuade us from making the trade.

Probably different for day traders. But I think you’d be hard pressed to come up with an argument that that industry improves the economy as a whole.

[SK in CV]

[quote=Aecetia]I think it is going to be difficult to define speculative trading from trading and anything that decreases money invested should work as a brake on what I still consider a fragile recovery. If you can show otherwise, then I would like to see how more transaction tax will stimulate Wall Street.[/quote]

I think the mistake here is the assumption that any stock trading increases the output of the economy. Other than when corporations go to market to raise capital (IPO’s or secondary offerings), it doesn’t. To bring it closer to this blog’s topic, it’s like looking at increased resale activity in the residential real estate market and saying the economy is growing. Other than brokerage commissions, it’s not. When I sell my 1,000 shares of Ford and you buy it, the economy hasn’t gotten any better. If I pay a 1/4 of a point to sell and/or you pay 1/4 of a point to buy, it probably won’t dissuade us from making the trade.

Probably different for day traders. But I think you’d be hard pressed to come up with an argument that that industry improves the economy as a whole.

[SK in CV]

[quote=Aecetia]I think it is going to be difficult to define speculative trading from trading and anything that decreases money invested should work as a brake on what I still consider a fragile recovery. If you can show otherwise, then I would like to see how more transaction tax will stimulate Wall Street.[/quote]

I think the mistake here is the assumption that any stock trading increases the output of the economy. Other than when corporations go to market to raise capital (IPO’s or secondary offerings), it doesn’t. To bring it closer to this blog’s topic, it’s like looking at increased resale activity in the residential real estate market and saying the economy is growing. Other than brokerage commissions, it’s not. When I sell my 1,000 shares of Ford and you buy it, the economy hasn’t gotten any better. If I pay a 1/4 of a point to sell and/or you pay 1/4 of a point to buy, it probably won’t dissuade us from making the trade.

Probably different for day traders. But I think you’d be hard pressed to come up with an argument that that industry improves the economy as a whole.

[SK in CV]

[quote=captcha]

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.

[/quote]

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.

[SK in CV]

[quote=captcha]

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.

[/quote]

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.

[SK in CV]

[quote=captcha]

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.

[/quote]

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.

[SK in CV]

[quote=captcha]

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.

[/quote]

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.

[SK in CV]

[quote=captcha]

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.

[/quote]

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.

[SK in CV]

[quote=meadandale]My combined effective tax rate for 2009 (state/federal/payroll) was over 38%.

Apparently Mark Twain was right…[/quote]

So you are either making well over $200K a year if you’re married or you’re self-employed. Good for you.

[Author]

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