Wednesday, January 29, 2014

Do You Know Your Tax Bracket? Part 2, Married Filing Jointly

Last week I talked about tax brackets if you are filing as Single. This week I am going to go over the same thing for Married Filing Jointly.

Though it is 2014 now, you are about to file your 2013 taxes. Let's say that Alexis and John got married in 2013. Congratulations!  But Alexis' taxes are going to change a little now that she is no longer single. For our example, she still does not have any kids or a mortgage or rent to deduct.

It is not as simple as saying Alexis and John made a combined $120,000 so they are in the 25% tax bracket and their tax is $30,000. The IRS charges 10% of the first tax bracket, 15% of the second, 25% of the third etc but it is not 25% of their full $120,000 in earnings.

First there are your standard deductions just for being a person. It is $12,200 for a married couple and the personal exemption is $7,800 for the two of them. This brings their taxable income down from $120,000 to $100,000. $100,000 is in the bracket marked 25%. This might seem to mean that their tax would be 25% of that or $25,000.  That is not the case. Their taxes are $16,858.

Here are the tax brackets for Married, Filing Jointly:

Taxable income between 0 and $17,850 is charged based on 10%.
Taxable income between $17,851 and $72,500 is charged based on 15%.
Taxable income between $72,501and $146,400 is charged based on 25%.
Taxable income between $146,401 and $223,050 is charged based on 28%.

So Alexis and John are not charged based on 25% of their $120,000 income or even the $100,000 income after their deductions. Instead they are charged 10% of the first $17,850, 15% of the next $54,649 ($72,500 - $17,851) and 25% of the remaining $27,500 ($100,000 -$72,500).

That means $1,785.00 is charged for the first bracket and
                    $8197.35 is charged for the second bracket and
                    $6875.00 for the third bracket
that equals $16857.35  and the IRS rounds it up to $16,858.

If you are worried about your tax bracket, you can always look at extra deductions such as charitable contributions or putting more money into your retirement account. I recommend you consult a tax professional or use a reputable tax software.

The most important point to remember is that you are not charged a flat percentage of your total income so going up a tax bracket is not as bad as it sounds. You do not suddenly owe 28% of your whole income because you and your spouse made $146,401 and the end of the 25% bracket is $146,400. You only owe 28% on that last dollar.

Thursday, January 23, 2014

Do You Know Your Tax Bracket? Part 1, Filing Single

It is coming up on W-2 time here in the USA. If you do not already have it, you will soon be getting that piece of paper that says how much you earned last year.  This leads to the inevitable filing of taxes.   Do you understand your tax bracket?

To make it simple, I am just going to look at Single status this week and Married Filing Jointly status next week.  I have put a link at the bottom to a Forbes.com article on tax brackets that lists several other categories as well if you would like to check it out.

Though it is 2014 now, you are about to file your 2013 taxes.  It is not as simple as saying you made $50,000 so you are in the 25% tax bracket and your tax is $12,500.  The IRS charges 10% of the first tax bracket, 15% of the second, 25% of the third etc but it is not 25% of your full $50,000 in earnings.

For example, lets make up a single woman named Alexis.  Alexis made $50,000 in 2013. Alexis has no kids or mortgage so she will be using the standard deduction. That means she does not have to count the first $6100 of her income.  Now she is down to $43,900.  The personal exemption is $3,900. Now she is down to being considered to have made $40,000 for 2013.  If she is in the 25% tax bracket that means she owes $10,000 right?  No, fortunately for Alexis, it does not. She only owes $5,929.

This is because the full amount of your income is not charged for the tax bracket you end in. Rather you are charged based on percentage for each tax bracket you go through to get to your final bracket.

Here are the tax brackets for this year:

Taxable income between 0 and $8925 is charged based on 10%.
Taxable income between $8926 and $36,250 is charged based on 15%.
Taxable income between $36, 251 and $87,850 is charged based on 25%.
Taxable income between $87,851 and $183,250 is charged based on 28%.

So Alexis is not charged based on 25% of her $50,000 income or even the $40,000 income after her deductions. Instead she is charged 10% of the first $8925. 15% of the next $27,324 ($36,250 - $8925) and 25% of the remaining $3751 ($40,000-$36,250).

That means $892.50 is charged for the first bracket and
                  $4098.75 for the second bracket and
                    $937.50 for the third bracket
that equals $5928.75 and the IRS rounds it up to $5929.

The most important point to remember is that you are not charged a flat percentage of your total income so going up a tax bracket is not as bad as it sounds. You do not suddenly owe 28% of your whole income because you made $87,852 and the end of the 25% bracket is $87,851. You only owe 28% on that last dollar.

Next week I will go over the same charts based on Married Filing Jointly.


http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/

Wednesday, January 15, 2014

I Should Get More Exercise

I should get more exercise. I could give you plenty of reasons and excuses why I don't. I have a knee that is missing tendons on one side. I have a shoulder that was dislocated as a child that still bothers me sometimes and I have fairly severe joint damage to one ankle.  All of these things are true. The ankle in particular bothers me fairly often. 

They are not, however, the real reason why I do not exercise enough.  Having a bad ankle would not stop me from doing sit ups or any number of abdominal exercises.  Having a knee that acts up when the weather is bad does not keep me from using hand weights to pump up my muscles.  No; the real reason I do not get as much exercise as I should is that it is not as easy as not exercising.

If you have a car, you probably know that your car will run better with regular oil changes. Your tires wear more evenly if you rotate them from one side of the car to another on a regular basis. Having a tune up can prevent costly repairs down the road.  Your body is the same.

Your body is a machine. It runs better and lasts longer and is much less likely to have major long term problems if you treat it right. This includes regular exercise.

My older sister was disabled. In my entire life, I never saw her walk. She was bound to a wheelchair and to a bed.  This did not mean she never got any exercise.  We used to do what we would call chair dance. She would sit in her wheelchair and I would sit in a kitchen chair and we would turn up the music and move just our upper bodies.  Sometimes she would just push her hand against mine to try to strength her arms.  She did the small things she could. 

So it is ridiculous to even try to tell myself that I could not exercise more than I do.   Maybe I can't run with my busted up ankle and most days my dance video games only get about 2 to 3 songs out of me before I am limping away. This does not mean I can not get more exercise. It just means I can't do that particular exercise. So I need to focus on the things I can do and make more effort to do them.  That seems like the kind of thing a goddess should do.

Wednesday, January 8, 2014

Frozen Pipes--How to Prevent and How to Deal

We are having a serious cold snap up here in the Northeast.  I have heard talk of reaching record breaking lows for this time of the year.  Serious cold can lead to serious problems with your pipes. 

There are a few things you can do to try to prevent frozen pipes.

1-Keep your heat turned up. Never let the temperature drop below 60 degrees Fahrenheit and when it is particularly cold, you may want it even higher.

2-Open cabinet doors in the kitchen and bathroom to allow air to circulate around the pipes.

3-Make sure you have plenty of insulation around any pipes located in crawl spaces on the outside wall. This area gets cold faster than you may realize.

4-Let a little bit of water drip out through faucets and shower heads if you know it is going to be particularly cold. Running water is less likely to freeze than standing water.

5-Turn off the water valve to outside water sources such as a hose before it gets cold. They should have their own valve or handle separate from the rest of the water supply.

If your pipe does freeze, here are a few tips.

1-Turn up the heat.  Let it get fairly hot in the hopes that it will melt the blockage in the pipe before there is a problem.

2-Use an infrared space heater. Have it face directly at the wall where the pipes are located. Make sure the heater is at least three feet from anything that might catch fire.

3-Use a hair dryer to try to gently increase the heat on the pipe so that it melts gradually. Do not put the hair dryer directly against the pipe.

4-Never use an open flame to try to defrost your pipes. There is too much risk of fire.

5-Do what you can to keep it from happening again. This could be wrapping your pipes in pipe insulation or having insulation put in around the pipes. If you are unsure what to do, consult a professional.

If you are lucky, your pipe will thaw out and work just fine. If you are not so lucky, a thawing pipe can often turn into a burst pipe. This would mean gallons upon gallons of water rushing through your walls or ceiling.

If the pipe bursts,

1-Immediately turn off the water. Find your water shut off valve and turn off the water.

2-Call a plumber. Try to make sure they are licensed and insured.

3-Open the faucet a little so the water in there can drain out.

4-Put a bucket under any water dripping through your ceiling to catch as much as possible. Use rags or towels to wipe up as much water as you can to minimize damage.

5-If there is enough damage,  you may be able to put in a home insurance claim. Consult your insurance agent.

Good luck.

Thursday, January 2, 2014

Start As You Mean To Go On

Start as you mean to go on.  It is something my father said to me once.  My father was not a big talker. He rarely used 3 words if 2 would do but every once in awhile he would get a little philosophical. I'm not sure if this was one of those times for him or just for me but the phrase has stuck with me all these years later.

Start as you mean to go on. What better time to think about that phrase then now as we are starting a new year? 

It means to begin something in the same spirit in which you want to end it.  If you want the new year to be happier and healthier then behave that way from the start. If you want to be treated well, act like you should be from the start.  Don't start the day yelling if you don't want to spend the day yelling.

It is simple advice but I think it is powerfully so.  Start as you mean to go on.  Well I mean to go on into 2014 eating healthier and not letting obnoxious people get me down.   So deep breaths, and here we go.