An Ode to Uncle Sam and Top 10 Ways to Save on Taxes
Every year about this time, when the Bureau of Labor Statistics (BLS) releases inflation data, specifically the CPI-U, experts from a variety of magazines and newspapers try to predict what the tax brackets will be the following year. This is possible because many figures in the tax laws are based on inflation, such as the standard deduction, contribution limits for Traditional and Roth IRAs, and the size and placing of the tax brackets themselves.
This year, the Tax Foundation is first out the gate with their prediction that everything will essentially remain the same as inflation was a mere 0.19%. When they performed this exercise in predicting the 2009 federal income tax brackets, they were 100% correct. I’m fairly confident that these numbers will be accurate when the IRS officially announces the tax brackets for 2010.
2010 IRS Tax Brackets
The below 2010 tax tables are the projected federal income tax brackets for 2010:
|Tax Bracket||Single||Married Filing Jointly|
|10% Bracket||$0 – $8,375||$0 – $16,750|
|15% Bracket||$8,375 – $34,000||$16,750 – $68,000|
|25% Bracket||$34,000 – $82,400||$68,000 – $137,300|
|28% Bracket||$82,400 – $171,850||$137,300 – $209,250|
|33% Bracket||$171,850 – $373,650||$209,250 – $373,650|
Here are some other important non-tax bracket-related updates (until these are made official by the IRS, these are merely predictions by the experts). As expected, no (or very small) changes:
- Standard deduction remains the same: The standard deduction for singles will remain at $5,700. For married filing jointly, the number will also remain at $11,400. If you are a Head of Household, it’s expected to increase by $50 to $8,400.
- Personal exemption remains the same: The personal exemption will remain at $3,650.
- Annual gift tax exclusion unchanged: For 2010, the current 2009 gift tax exclusion of $13,000 is expected to remain the same. The gift tax is how much you can give to someone else without any tax considerations.
Here is a Facebook thread that posts my opinions about Uncle Sam’s birthday.
FB Status: April 15, Tax Day, also known as the Government Robbery holiday. FACT: Out of every dollar that the government spends this year, 61 cents is actually paid for by taxes and 39 cents is borrowed. How to fix this? Cut spending and raise taxes even more! We need new economists.
Responses: Aaron Bellweston – I agree, some, all of these programs are in terrible need of reform. However, (pause for effect) being an American is not about coming up from the bottom (surprise). It’s about helping your fellow American achieve Life, Liberty, and the Pursuit of Happiness, together. So, (another pause) put yourself in the shoes of a single mother of 3, who just lost her job. What would you do without Medicaid and some of the other “bills we have to pay on Tax Day”?
Reply: Aaron – great points and love the pauses for effect! =)
I’m double-sided on this. Being someone in the Gen Y bubble and experiencing the financial lashing that my husband I do every time tax time comes around, it’s very discouraging to move anywhere near the double-digit tax bracket by making more money or getting a promotion.
We are by no means rich or well endowed financially, but we make more than the average married couple in their mid-twenties. I call this day robbery day because instead of being able to save, we are liable to pay thousands upon thousands of dollars even after our paycheck tax witholdings.
We were told by our tax accountant, in such few words that the only way we can save money on our taxes is to buy a home and have a few kids. We aren’t ready for kids right now!
We are already maxed out with our contributions to our 401k plans and can only contribute so much to Flexible Spending Accounts – where else can we hide our own money?
Now, I would not mind this if the programs we actually paid for worked to invest in a better future so that we are not sustaining programs that only benefit our current economic situation. I felt extreme gusto in posting this since education only accounts for 2% of the tax dollars we exhaust to pay the government this year.
How are we supposed to seek a better future with only 2% of these funds allocated to education?? Don’t we want a better future by educating our children and providing them with the best opportunities to learn as possible? This include hiring the best teachers and decreasing the teacher to student ratio!
Anyway, you can tell how much deeper the head is on this with me. I am just so very frustrated.
For some comedic relief I offer you the Top 10 ways to save on your taxes where you’re a zesty double income family with no children in your mid-twenties:
1. Have a kid – get money back, have several, get more.
2. Buy a house – get money back, have several, get more.
3. Buy something over $20,000 – preferably a nice shiny car or a Louis Vouitton purse
4. Max out your 401k contribution to 15%
5. Max out your FSA contribution to $2-3000 – then get sick or buy a lifetime supply of NyQuil so you can actually use the money in that account.
6. Start your own business – even if you don’t know what to sell.
7. Do not accept a promotion – Mo’ Money, Mo’ Problems = Mo’ Taxes
8. Do not accept a raise – Mo’ Money, Mo’ Problems = Mo’ Taxes
9. Do not accept a bonus check – Mo’ Money, Mo’ Problems… you get my point.
10. Move to Portland – No State Tax and you can forgo Jamba Juice and good weather for granola bars and hiking.
Ok done. Thanks for tolerating my rant about this. And for the blokes with widened eyes, I am in no way advising you to do the aforementioned – just my take on the satiric humor.
More on Tax Credits
Needless to say the only tax credit we are receiving this year is the Make Work Pay tax credit. Sadly, this only pays for 15% of what we owe to the government. Go figure!