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Originally Posted by tres
2 questions for ya...
1- I claim "0" or "1" on my tax for for deductions which is supposed to mean they take the most out of every check. I take an additional $20 out per check just to be sure I don't have to pay at the end of the year. Why do I still end up owing?
2- I currently contribute 3% to my pension. If I understand correctly pension comes out pretax, additionaly the amount you get taxed depends on your tax bracket. Can I contribute more to my pension to the point that i lower myself into the next tax bracket and take home equal or the same amount of money each check?
Tres
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not the tax guy but can answer some of these... (tax guy correct me if I'm wrong or please clarify items better)
1. which do you claim? 1 or 0? 0 is the most they will take out, 1 is claiming 1 deduction is = $3,200 which is what I got from the IRS.gov website.
Some people don't like the idea of claiming 0 since they say that it's like giving the money to the government as an interest free loan. Okay I see that but I'd rather personally give them something that I don't miss than have to dig into my pockets. I claim 0 at all jobs I've held.
2. yes, that's the point of the pretax advantage. it's supposed to reduce your level somewhat especially if you are near the border of a tax bracket. There is a limit on the pension contribution, 401k is $15,000, IRA $4,000. You cannot double dip and contribute to a 401k and an IRA and expect to get the tax dedcution on both.
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