USA Young Man Needs Tax Help!

[dairo1]

Hello everyone. I just have some questions in general. I have landed my first decent job with a 401k and health, vision, and dental insurance. I will try and summarize this as best as I can, and try and make my questions make sense, because I'm confused.

I'm from the USA and I claimed 0 on my w-2, I'm a single male. My yearly income is $41,600 dollars (20.02 and hour). From googling tax brackets I found this. https://taxfoundation.org/2017-tax-brackets/


Rate Taxable Income Bracket Tax Owed
10%

$0 to $9,325 10% of Taxable Income
15%

$9,325 to $37,950 $932.50 plus 15% of the excess over $9325
25%

$37,950 to $91,900 $5,226.25 plus 25% of the excess over $37,950


So I am in the 3rd tax bracket. My question in general is, If I put enough money in my 401k (10% would be 4160), and my weekly insurance costs of 35 dollars, which would be 1820 dollars a year. 41600 - 5980 = 35620. This would put me into the 2nd tax bracket, so in a sense I would be saving money, and not just giving it to uncle sam? This is where I just don't have the answers. Would I expect to see a bigger refund at tax time? Also would my weekly taxes go from 25% down to 15%?

I hope this makes sense and thank you for reading and any help would be greatly appreciated!

 

[kirby]

Because your gross is $41,600 does NOT mean you are in the 25% bracket. Reason: brackets apply to TAXABLE income. If we assume you will use the standard deduction WITHOUT a 401K amt of $4,160 - your taxable income is $31,250 - putting you in the 15% bracket. WITH the 401K, your taxable income is $27,130 and you are still in 15% bracket.

But anyway assuming the 401K did move you to a lower bracket, yes you save tax. Reason: the assumption is you will withdraw (pay yourself) the 401K money in years when you are not working so your taxable income will be in a lower bracket.
As for bigger refunds, no - because a lower taxable income ALSO means lower tax withheld.

 

[dairo1]

But it says right in my ADP payment page that they are deducting 25.8% of my income. So...

Right now I am on the probation period for 3 months, so I am paying nothing into my 401k or benefits. I made 800 dollars, and only seen 600 of it. 25%.

 

[kirby]

Remember that your total deductions will be more than just for the Fed withholding that we discussed above.
You also have state income tax withholding, and the social security tax withholding, and your portion of state unemployment tax and any deductions for medical dental coverage. (and and and .. almost a miracle that anything is left over for yourself!)

 

[dairo1]

So I could just put 6% into my 401k (they match up to 6%), and my benefits, and I'd still only be in the 15% tax bracket? I'm so confused.

 

[kirby]

Please re- read the first paragraph of my first post to you. Your gross wage ($41,500) less your standard deduction and exemption is a net of $31,250. That $31,250 is your taxable income and THAT is what the tax bracket applies to, not to your gross wages.

 

[dairo1]

I had no idea that was how it worked. I was told differently. Glad I came here. Thank you so much.

Oh so your saying that with the fed, state, and other taxes it equates to roughly 25% percent of my income.

 

[Drmdcpa]

You will get back your income tax withheld or at least it will be applied to your income tax liability. At Single 0, more than likely you will get a refund come tax filing time. Social security and Medicare taxes are gone.

 

[dairo1]

What is your income tax liability?

Does anyone know of a website that has these things broken down? Maybe easier to understand.

 

[kirby]

https://apps.irs.gov/app/understandingTaxes/teacher/hows_mod01.jsp

Try this for a start on understanding the taxes

 

[Drmdcpa]

Your tax liability is the net tax that you owe. Taxable income times tax rate = total tax. Total tax less non-refundable tax credits plus additional taxes and some penalties = tax liability.