got hit paying higher than expected taxes (yes I opted out of child tax credit)

I thought there were limits to investing in a IRA if you made over $200k as a married couple?
Should I have added more to our Childs 529 plan?

Thanks! I appreciate all the advice, I ended up closing up my Edward jones account and opening fidelity based on advice from this group!

Solid flex.

Brian Earl Spilner said:

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Solid flex.

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nope, this isn't the GB. Just asking for advice

Are you asking about Roth or Traditional ?

you can invest in an IRA, but you get phased out of the deduction. So, you are better off funding the IRA each year and doing a Roth Conversion.

Hedge said:

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Are you asking about Roth or Traditional ?

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either. I thought you phased out on both?

Well you can make a traditional contribution at any income, however you can't deduct it from your ordinary income if you're in a qualified plan and make over X amount (forgot what 2022 numbers are)

A 529 isn't reducing your tax liability when you put into it, only on the earnings when used.

Are you eligible for 401k and do you max it? What about HSA?

ORAggieFan said:

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A 529 isn't reducing your tax liability when you put into it, only on the earnings when used.

Are you eligible for 401k and do you max it? What about HSA?

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I don't think we are eligible for 401K

insurance is paid for our family by husbands work but maybe that's something I could check into. thanks

Hedge said:

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Well you can make a traditional contribution at any income, however you can't deduct it from your ordinary income if you're in a qualified plan and make over X amount (forgot what 2022 numbers are)

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is there anything I can do? besides maybe give more to charity?

So do you and your husband have any retirement plans with your work right now?

200k huh?

Sorry I cannot help you because I make over 300k and spend most of my time on the millionaire thread!

Tatem said:

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Hedge said:

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Well you can make a traditional contribution at any income, however you can't deduct it from your ordinary income if you're in a qualified plan and make over X amount (forgot what 2022 numbers are)

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is there anything I can do? besides maybe give more to charity?

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Taxes don't just magically go away. If you donate to charity, you're reducing your tax liability, but you're out more money overall. I'm not suggesting not to donate, but doing it just to reduce taxes isn't a good reason.

If he doesn't have a work sponsored 401k you can contribute into a traditional IRA and reduce tax liabilities. You may still be able to contribute to last year (I don't know all IRA details, but other similar plans allow previous year until 4/15).

You really should be talking to an accountant.

ORAggieFan said:

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Tatem said:

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Hedge said:

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Well you can make a traditional contribution at any income, however you can't deduct it from your ordinary income if you're in a qualified plan and make over X amount (forgot what 2022 numbers are)

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is there anything I can do? besides maybe give more to charity?

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Taxes don't just magically go away. If you donate to charity, you're reducing your tax liability, but you're out more money overall. I'm not suggesting not to donate, but doing it just to reduce taxes isn't a good reason.

If he doesn't have a work sponsored 401k you can contribute into a traditional IRA and reduce tax liabilities. You may still be able to contribute to last year (I don't know all IRA details, but other similar plans allow previous year until 4/15).

You really should be talking to an accountant.

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Yeah I agree, I just need to sit down with one

Hedge said:

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So do you and your husband have any retirement plans with your work right now?

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yes, we both do

I have IRA's also but I didn't help with my taxes the year I put money into them

ORAggieFan said:

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Tatem said:

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Hedge said:

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Well you can make a traditional contribution at any income, however you can't deduct it from your ordinary income if you're in a qualified plan and make over X amount (forgot what 2022 numbers are)

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is there anything I can do? besides maybe give more to charity?

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Taxes don't just magically go away. If you donate to charity, you're reducing your tax liability, but you're out more money overall. I'm not suggesting not to donate, but doing it just to reduce taxes isn't a good reason.

If he doesn't have a work sponsored 401k you can contribute into a traditional IRA and reduce tax liabilities. You may still be able to contribute to last year (I don't know all IRA details, but other similar plans allow previous year until 4/15).

You really should be talking to an accountant.

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My first comment was wrong.

OP - it depends on your source of income, account possibilities (401k or HSA, etc). I'd talk to an accountant because you aren't giving really any details here other than income.

They can if they're not in a qualified plan

Ah okay. I'll edit.

Op: do you think you paid too much taxes this year as a percentage of your income, or does turbotax say you owe more than you were expecting to? If the latter, you just need to adjust your witholdings or be prepared to cut a check every april. If the former it sounds like you need to familiarize yourself with the concepts of marginal tax rates, pre-tax witholdings, and magi.

Spot on $200k of total income MFJ with 2 kids and a standard deduction is at the very top of the 22% marginal bracket for taxable income. Effective tax rate is probably in the 18% range.

Historically, that's a bargain. I'm not jumping through hoops to save 22% marginally.

That's a pretty high effective tax rate I would've guessed 12-15%

2022 chart is my handy one... $178,150 of taxable income is $30,427. Add standard deduction to that gets you right over $200k, 15%ish. Child tax credits, this that an the other, maybe income was $210k and not $202k +/- a percentage point or two.

Hedge said:

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That's a pretty high effective tax rate I would've guessed 12-15%

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Yeah, $200k with only standard deduction puts you at 15% effective (married jointly, two dependents).

You subtract the standard deduction not add it

You're not following...

Charts list taxable income, not total income. I'm adding the deduction back to taxable income (which I'm looking at to get tax due for a given income) to estimate total income, which is what OP is talking about. /notgonnahijack

Go use this. https://www.nerdwallet.com/taxes/tax-calculator

You're right on the marginal and your point. Just not the effective.

There is a lot of confusing things being said here. It would be highly unusual for the OP to have zero access to an employer sponsored 401k. Maxing that or both is the easiest answer.

Tatem said:

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ORAggieFan said:

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A 529 isn't reducing your tax liability when you put into it, only on the earnings when used.

Are you eligible for 401k and do you max it? What about HSA?

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I don't think we are eligible for 401K

insurance is paid for our family by husbands work but maybe that's something I could check into. thanks

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Check into the 401K for sure. If you're self employed they do have single payer 401Ks too.

The income limitation on IRA deductibility does not apply to employer sponsored plans.

If you have not contributed because of this it's a pretty big miss.

There are plenty of employers that don't offer 401ks. Most small businesses don't. Many have sep/ simple iras

evestor1 said:

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200k huh?

Sorry I cannot help you because I make over 300k and spend most of my time on the millionaire thread!

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When you get to a certain point, you might receive an invite via PM to join us on the "8 Figures+" board.

It's not listed on the public Forums list, for obvious reasons.

Charismatic Megafauna said:

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There are plenty of employers that don't offer 401ks. Most small businesses don't. Many have sep/ simple iras

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Ok I just googled this as it's not my experience at all. Turns out about half of businesses with less than 50 FTEs offers a 401k. That's crazy - should be the first EE benefit as it's very inexpensive.

Husky Boy Jr. said:

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There is a lot of confusing things being said here. It would be highly unusual for the OP to have zero access to an employer sponsored 401k. Maxing that or both is the easiest answer.

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My husband is in education So he has teacher retirement. I don't know if we've ever had access to a school 401k
We have 1 child and we have two incomes.
I'm not great with finances
I think I'll talk to an accountant after tax season

Thanks

Husky Boy Jr. said:

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Charismatic Megafauna said:

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There are plenty of employers that don't offer 401ks. Most small businesses don't. Many have sep/ simple iras

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Ok I just googled this as it's not my experience at all. Turns out about half of businesses with less than 50 FTEs offers a 401k. That's crazy - should be the first EE benefit as it's very inexpensive.

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My ex-wife is a psychologist. She works for a small practice (she's an employee, not a partner). She's been with them going on 12 years, and this last year, they finally just decided to setup a 401k for their employees. The practice has been around for a number of years before she joined, no idea what took them so long.

Husky Boy Jr. said:

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Charismatic Megafauna said:

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There are plenty of employers that don't offer 401ks. Most small businesses don't. Many have sep/ simple iras

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Ok I just googled this as it's not my experience at all. Turns out about half of businesses with less than 50 FTEs offers a 401k. That's crazy - should be the first EE benefit as it's very inexpensive.

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I think it's simply a reflection of the lack of financial education in this country and what's available to you. Take this board as an example...it's easily one of the more educated populations when it comes to personal finance and we still have posters on here unaware (and routinely at that) that they can contribute to a Roth despite income limits.

One of my best friends is a freaking CEO and wasn't aware of this until I told him about it a couple of months ago. He pulled trigger on a financial advisor because he was so embarrassed about this and started panicking about what else he didn't know. Lol.

This country is simply not educated in money, how it works, and options for growing it. The primary reason I'm as knowledgeable as I am (and not an expert) is because i grew up in a CPA household.