Quote:
Originally Posted by ABMW
My income is substantially higher than $45k. That is the confusion you all are confusing, I believe. Magnify it by many magnitudes. I also file jointly with my wife.
Thus, a $65 to $70k deduction at my tax rate of 56% helps me a great deal.
33% federal Tax Rate + 15% self - Employment Tax Rate + 9% CA Tax.
My total income is in the mid 6-figures when combined with my wife's. The $65 to $70k deduction doesn't really toss us into a lower tax bracket, but it helps with not having to pay taxes on that amount of income at my tax rate.
In other words, as a hypothetical example: Imagine I made $100k. I purchased a vehicle for $70k for business that allowed me to deduct the full 100% (or depreciate the full 100% the first year-2009). My effective income then drops to $30k. My tax rate on 30k, due to my wife's income is still 50%.
The math works well. I'm displaying the above as a hypothetical example to assist others, as I know there are many in the same boat as am I.
If it's complicated, that's the point. IRS code is not fun, but it helps to be married to one who's a smart gal with a certain advanced degree that everyone loves to hate. You all can figure out what degree that is, I'm sure. But, for the record, she hates it to, so don't let your kids ever take the LSAT and as a final note, the figures are 100% correct for MY situation.
If you're coming up with differing figures, your math or interpretation is incorrect, but I can refer you to a very good individual who can assist.
Really, I'd like to help, so don't hesitate to PM me on this matter. If you use your X5 for business, and you bought it new this year, I strongly encourage you to at least investigate the option of accelerated bonus depreciation that's available to you.
Best
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So you have an effective rate of 56%. That part makes sense to me. You still can't get to a 45K deduction, no matter what math you use. Even at 100% of a 62K SUV, you still land at 34K (and you can't do it at 100%)
You would have maxed out on social security already, that is 12.4% on your self-employment tax. So no savings there. Medicare at 2.9% is not impacted by deductions, it's straight off the income line. So that lowers your effective rate to 42%.
Once you maxout on the brackets, your income doesn't matter. I'll guess most people in this forum make some decent money if they are buying X5s.