Hey all,
Okay, I’m not going to pretend that this is the smartest question in the world, but I had traumatic experiences with math with Sister Marie Clothilde in fifth grade. I’m working on it!! I’m even taking a technical math class over the winter. But right now, I just can’t figure this one out.
Say we have a nontaxable income of $**31,056 **per year. This is not taxed in any way (federal or state.)
This would be in a 15% tax bracket if it WERE taxable.
So what would the equivalent amount be if it actually were taxed at 15%?
I know there has to be a simple way to figure this out, but as I said… past math trauma, I’m working on it, and I just can’t get there. All help appreciated.
You have to figure out where the tax rate kicks in, and then subtract out that from your total. The fist $X,XXX dollars you earn are not taxed. But then you also have to figure out your deductions, whether you are going to itemize (probably not, unless you have a big mortgage) or just take the standard deduction.
$36,536.47. If you pay 15%, then you keep 85% of it and .85*that amount is exactly what you specified. So I took that your net and divided by .85 to reverse the operation.
Thanks! I KNEW it had to be something simple. BTW, the Pew calculator claims that this is “middle class” where I live, and I’m not sure what they’re smoking to come up with that, but that’s a subject for another board.
Well, it’s not really that simple. You say “we”, so let’s assume that you are married filing jointly. Assuming no dependents, you would have 2 exemptions of $4050 and a standard deduction of $12700 - so $20800 of your income is not taxed. The next $18650 of income is taxed at 10%, not 15%. Taking this into account, the equivalent taxable income to your $31056 is about $32196.
If your situation is different (different filing status, different number of exemptions) then this number would change.
Great run down on Federal income tax … but you forgot SS tax:
If the income was earned with a W-2 form, then the SS tax rate is 7.5% and your employer matches that with another 7.5% … if you’re self-employed, then you pay the entire 15% … on all amounts over $400 in a given year …
However, if the income was unearned (like royalties, dividends or rents), then there’s no SS tax …
Maybe the OP is just badly written, but she specified that it’s untaxed income and wants to know what it would be if it were taxed. So the number should be smaller, not larger.
I don’t think so. She’s asking what the income would need to be to get that amount after 15% in taxes had been taken out. So the answer must be larger.
It also seems to be a way of asking how to do the math, not what the answer would be in the real world of tax laws. Complicating the problem with suppositions just hurts comprehension rather than helps.
The OP did not give enough information to adequately calculate the desired number (filing status, number of exemptions) so some suppositions are necessary.
If you are asking how much you would need to start out with if you were taxed at 15% and wanted to end up with 31,056, you gross up the amount. To gross up the amount:
Subtract the tax rate from 1:
1 minus .15 = .85
Divide the amount to be grossed up by the result of the previous calculation:
31,056 / .85 = $36,536.47
Check the math:
36,536.47 * .15 = 5,480.47
36,536.47 minus 5,430.47 = 31,056
If you are asking how much you would have left if the original amount of 31,056 was taxed at 15%, multiply it by .85 (or multiply it by .15 and subtract that amount from 31,056)
The point I was trying to make is that the OP was positing that since $31056 would be in the 15% tax bracket, therefore the whole amount is taxed at 15%. That is not how tax brackets work. Everyone will have a certain amount of income that is taxed at a 0% rate (at a minimum exemptions and the standard deduction). A certain amount of income above that will be taxed at 10%. If income is high enough that the taxable income crosses a the 15% tax bracket boundary, then only the amount which exceeds the tax bracket boundary is taxed at 15%. The process is similar as income crosses higher tax bracket boundaries.
Simply answering the OP’s question without correcting the misunderstanding behind the question is an incomplete answer.
I assume that this is the same as someone over here asking what the pre-tax cost of a car is, if the car cost £30,000, and the tax was 20%. The arithmetically challenged might well say £2400, (30,000 - (20% of 30,000) but of course, everyone here knows that is incorrect.
To calculate nett pre-tax amount, having the gross amount you should divide the gross amount by 1 + tax percentage (i.e. if it is 20%, then you should divide by 1.2), then subtract the gross amount. This gives you the actual tax and the pre-tax is a simple subtraction.
Exactly. People think that they should avoiding taking overtime because they make $37,500 taxable and another $500 will push them into the 25% bracket, so their taxes will go from $5625 to $9500. No, it will go from (approx) $5161.25 to $5271.25.
We can’t do that when calculating Federal income taxes … we can’t ignore exemptions or standard deduction and still give a factual answer, especially if our gross is less than $50,000 … I’m looking at the 2016 Form 1040, we’re subtracting standard deductions and exemptions before we get to “Taxable income” (line 43) …
Single, one exemption gives the first $10,350 as income tax free; the 10% rate would only apply to the remaining $20,706 … Married filing jointly, 5 exemptions gives the first $32,886 as tax free; the whole $31,056 the OP made is tax free …
That’s over a $2,000 difference … can’t ignore those basic factors …
Is seems pretty clear from her second post that she was looking for an equivalent earned, taxable income number to put into the “Pew calculator”, presumably to determine how her income compares to the statistics in her area.
I’m working on it!! I’m even taking a technical math class over the winter. But right now, I just can’t figure this one out.