Message Font: Serif | Sans-Serif

No. of Recommendations: 0
Hi Fools!

I'm glad to be back. Just rejoined tonight after being away for about 4 years.

I am recently married (June 2006) and want to know how my tax situation will change and how best to prepare for next year when our incomes will change.

Specifically my wife made about 51k in 2006 and I made 52k. Together we made 103k. Next year my wife will make 53k and I will make 93k.

For this tax year, am I right to assume I first need to reduce this 103k gross income for our pretax 401k contributions and mortgage interest before using the 2006 federal tax schedule? (and anything else that reduces taxable income)

Let's assume that I do this and our taxable income comes to 87,000. Following this 2006 federal tax rate chart:

If taxable income is over-- But not over-- The tax is:
\$0 \$15,100 10% of the amount over \$0
\$15,100 \$61,300 \$1,510.00 plus 15% of the amount over 15,100
\$61,300 \$123,700 \$8,440.00 plus 25% of the amount over 61,300
\$123,700 \$188,450 \$24,040.00 plus 28% of the amount over 123,700
\$188,450 \$336,550 \$42,170.00 plus 33% of the amount over 188,450
\$336,550 no limit \$91,043.00 plus 35% of the amount over 336,550

Does this mean: 87,000 - 8,440 = 78,560 - 61,300 = 17,260 * .25 = 4,315.
78,560 - 4,315 = 74,245?

Does that follow correctly? Now what can I do next year when we combine for 146k? I assume it is smart for me to lower our taxable income below \$123,700 to get into a lower tax bracket, right? What are smart ways to do this if we are already contributing 10% to our 401k's?

-p8ntbal fool-

### Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.