Tax Bracket
I have a main FT job where my income will be over the $47,151 range. I have a PT job that is less than $11,600 and my husband's job yearly income is under the $47,151 range. We file MFJ. We have 2 dependent's. This was the case last year but I was told the income bracket will be higher this year so I was told to put more money in my retirement to lower the tax liability. However that gets pulled out once you start drawing out retirement correct? I want to know if I should put more money in retirement to lower or stay where I am at b/c I don't think we will get under the 22% tax bracket. We will definitely be below the $100,525. I don't understand the Federal tax rate. $5,426 plus 22% of income over $47,150. How is that calculated? For example if our combined AGI is $75,260 how would that be calculated?
Answers
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If the contributions to retirement are deducted directly from your pay & deposited into a company-sponsored retirement account (such as a 401k or 403b), then those contributions lower your income reported on your tax return. Those contributions won't be taxable until you begin drawing on that retirement account.
Your income tax is calculated off your taxable income, which is your income minus deductions (itemized or standard deductions). Once your taxable income is calculated, it's typically easier to use the tax tables located in the IRS's Form 1040 instructions (this is the 2022 table currently available).
