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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Hi, I appreciate your help in answering these three specific

Customer Question

Hi, I appreciate your help in answering these three specific questions:

1) If my annual taxable income is $50,096 and I’m in the 25% tax bracket (filing as head of household), will the standard deduction get me down to the 15% tax bracket which tops out at $48,600?

2) I know my mortgage interest deduction will help offset some income, but it won’t drop it be the $1,400 needed to be in the 15% bracket. Can I put some of my income into a tax-deferred 401(k)/IRA plan to lower my income even more? Would that be a viable technique to lower my tax bracket?

3) Lastly, would I need to itemize or can all this be done using the standard deduction? Thank you.
Submitted: 3 years ago.
Category: Finance
Expert:  Megan C replied 3 years ago.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com.

Megan C :

First and foremost I would like to explain tax brackets to you. lowering your tax bracket won't lower your overall tax, except to the extent that you have reduced your taxable income.

Megan C :

Our tax system is tiered. You pay 10% tax on income in that bracket, then 15% on the next part of your earnings in that bracket, then 25%. Being in the 25% tax bracket simply means that your last dollar of earnings is taxed at 25%. Not 100% of your earnings.

Megan C :

Your taxable income is calculated by taking out the standard deduction, so I'm not sure what you mean by your taxable income being $50,096. If that's your after-tax pay for work then yes, the standard deduction will get you to the 15% tax bracket.

Megan C :

You may also put some of your funds in an IRA or 401(k) that would also help to lower your tax bracket as well.

Megan C :

You do not need to itemize to reduce your taxable income by paying into tax deferred accounts.

Megan C :

Do you have any further questions? If not, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today. Thanks again for being a valued JustAnswer.com customer.

Expert:  Megan C replied 3 years ago.
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer