Tax Return Question?
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If my sister has filed her return and her AGI is $30,000 Flat after all deductions and she falls in to the 25% tax bracket… she gets a return of X dollars. If she decides to put a 1000 in an IRA and drop her bracket to 15% and her AGI to $29,000, how much more will she get on her tax return. Please define X + __?___ . Include calculation if possible. Thanks.
I apologize for not including more details. I meant to say that her taxable income is $30,000 after the deductions, not her AGI. Let me know if you need any clarification.
July 26th, 2010 at 12:30 pm
im not going to do the muti. for you if shes now at
AGI 29 Im betting she will get a little more back…
merlin
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July 26th, 2010 at 1:29 pm
Doing your homework for you, are we??
merlin
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July 26th, 2010 at 2:31 pm
It depends on whether she is filing single, HOH, MFJ, or MFS, and itemizing or taking the standard deduction, and how many dependents she has. Assuming she’s single, income about $25k puts her out of the range for receiving the Retirement Savings Contribution Credit.
Assuming that she’s single with no dependents, after taking the standard deduction and her own exemption (totaling $8200), her taxable income is $21800 (w/o IRA) or $20800 (w/ IRA)
the tax at $21800 is $2909, tax at $20800 is $2,759. (From the tax tables). Therefore, her refund will be $150 more than if she did not make an IRA contribution.
If you had included more information, I would be able to make a better conclusion, so this is based on a few assumptions.
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July 26th, 2010 at 3:33 pm
I think your fundamental question is whether she can save tax on all her income by contributing some to an IRA. The answer is no. If she is in the 25% bracket, that 25% rate only applies to her income above a certain level. If she is less than $1000 into the 25% bracket, then she will save 25% times the amount that falls into the 25% bracket, and 15% of the remainder that falls into the 15% bracket. The tax on the amount of taxable income that remains after the IRA contribution deduction will not be affected one way or the other.
1040 EZ instructions
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