what can i do that will deduct my 29% tax?

Question

single, earned income

Answer 1

Very few of the answers above do make any sense. Registering as a company does not make sense. First, you have to be a legitimate self-employed entity. I gather you are not. Second, at your earnings level, your tax liability would be higher as a corporation vs an individual.

Also, adding additional personal exemptions on your W2 as suggested by others does not work either. First, they are illegal. Being single with no dependent, you just can't claim additional personal exemptions. Even if this was legal, it would still not work. It would increase your take home pay marginally. But, it would increase your tax liability at filing time. So, you have to try something else.

Buying a home will result in substantial tax deductions because the interest component of your mortgage and property taxes are tax deductible. However, I am not sure buying a home makes sense right now. They are staggeringly expensive. The mortgage will wipe out your cash flow. Forget the good life. Also, from an investment standpoint over the long term, I am not sure that a home is a better investment vs renting, and using the savings to invest in a diversified portfolio of stocks and bonds index funds.

Here is what I think makes better sense for you.
First, realize that a 29% income tax rate for the amount of money you make is extremely low. It has to be one of the lowest income tax rates of any developed country.

Second, maximize your funding under your company's 401K plan (at least reach the minimum level qualifying for the company's matching. It is typically 3% to 6% for most companies). That will reduce your taxable income and give you an automatic 100% return on your money because of the company's matching.

Third, invest the maximum you can in a Roth IRA (maximum $4,500). At your income level, you don't qualify for a traditional IRA anyway. And, for you a Roth IRA is better anyway, since you will never have to pay taxes on those funds.

Fourth, consider donations to your favorite charities. These will reduce your taxable income too.

Fifth, put some money in your company's flexible spending account for covering out of pocket medical expenses.

Sixth, if you have some extra funds for investments consider Muni bonds. On an after tax basis, they provide a higher return than taxable bonds because their interest income is not taxable.

In summary, I gave you several recommendations to increase your taxable deductions. These include the 401K, donations, flexible spending account. I also gave you recommendations to boost your tax-free investment income: Roth IRA, and Muni bonds.

If you need any clarifications don't hesitate to contact me through "Answer." And, I'll revise my answer accordingly.

Answer 2

The first answer is a little off. For a small company, making between 100 and 335k a year...taxes are 39%. For an individual, same income they are 31 to 33%....so, personal is less than corporate. If you are in the 29% bracket, you are around 100.

Anyway...yes. Go to HR, fill out a form, and ask them to take more money out...

Answer 3

Register yourself as a private limited company. For companies, all expenses will be deducted from income before tax comes into the picture. Also, company tax is lower than personal tax.

Answer 4

in case you had taxable earnings in 2007 and claimed exempt once you weren't entitled to for 2008 (see W-4 kind classes) and owe better than $one thousand tax, there is not in user-friendly terms an decrease than withholding penalty, yet in addition i think of a $500 high quality for fraudulently claiming exempt.

Answer 5

go to your employer, human resources department and say you want more deducted out of your w2 witholdings.

Answer 6

If you don't have one already... buy a house.
Best deduction of all.