Wow I just found out low income in michigan is considered below $47,000/year. But what is funny about that is if you make over $52,000/year you lose a few tax breaks (not sure if it has changed for 2005 taxes). For example you lose the 401k tax break(which for me,up until this coming year, has only been a $50 deduction because of what I earn). This is kind of scary because this is based on agi not gross. Therefore last year I missed being low income by $1000 (agi). No wonder I dont have any money. It just amazes me that your considered low income at one price and then 5k higher you lose a bunch of tax breaks. Doesnt seem very fair to me. But like was mentioned in another thread middle income earners are a dieing breed.
Low income
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Low income through immigration is considered 12,000.00 a year. So if you have someone from another country here you only need to make 12,000.00 a year, which I found hard to believe. Husband is from canada and I have to show income tax documents. But if you are born here and married to another american low income falls in a much higher catagory.
Kaye
Kaye
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Who's "The Government"? 
I am a tax consultant (well tax accountant actually) and I am not sure the above is at all accurate. (Not what Sly said, but the very first post..._Sylock said:
As for IRC sec. 401(k) contributions......
The maximum amount you can contribute each year to all 401k plans in which you participate is the lower of: (1) the maximum percentage of your salary that's allowed under each of your employer's plans, or (2) the dollar limits shown below. For example, if your employer's 401k plan allows you to contribute 10% of your salary, and you earn $50,000, your maximum limit is $5,000, not the $13,000 limit in 2004 that applies only to higher-paid employees.
The IRS has also set limits on the total amount that may be contributed to your 401(k) account from all sources combined, including any employer matching or profit-sharing contributions, and any employee after-tax contributions. For 2004, the maximum is the lesser of 100% of compensation or $41,000. The $41,000 limit will increase in $1,000 increments based on cost of living adjustments.
As for losing tax breaks, unless you are married filing separate most of the "loss of tax breaks" starts around 100k of AGI. This where you start to reduce Itemized deductions and exemptions and some credits.
Tim, that's right thanks for the numbers:
401K limit is 13K, 14K next year I believe. Plus 401K contributions adjust your AGI not your Net (that was one of my questions when I was first getting into my 401K 10 years ago, I'm not say you didn't already know that)
Even being single I believe the first reduction in tax deductions begins in the 80K range.
I hate the Michigan law that you can't claim home interest if you make 80-something K ... married or single, the number doesn't change.
I love the new capital gains tax though ... although I think it should be changed back.
Anyone know the 2005 FICA ceiling? Something like $89K?
401K limit is 13K, 14K next year I believe. Plus 401K contributions adjust your AGI not your Net (that was one of my questions when I was first getting into my 401K 10 years ago, I'm not say you didn't already know that)
Even being single I believe the first reduction in tax deductions begins in the 80K range.
I hate the Michigan law that you can't claim home interest if you make 80-something K ... married or single, the number doesn't change.
I love the new capital gains tax though ... although I think it should be changed back.
Anyone know the 2005 FICA ceiling? Something like $89K?
Where exactly did the figure for $47,000 = "low income" come from? When I graduated college in 2002 I signed on at $46,000 and would hardly consider that "low income".
I've always seen low income defined as:
Income below 200 percent of the federal poverty level (FPL)
That being the case, Low income would work out to be:
$17,960 for a single person
$24,240 for a family of two
$30,520 for a family of three
$36,800 for a family of four
$43,080 for a family of five
$49,360 for a family of six
The FPL values can be found
Federal Register, Vol. 68, No. 26, February 7, 2003, pp. 6456-6458
I've always seen low income defined as:
Income below 200 percent of the federal poverty level (FPL)
That being the case, Low income would work out to be:
$17,960 for a single person
$24,240 for a family of two
$30,520 for a family of three
$36,800 for a family of four
$43,080 for a family of five
$49,360 for a family of six
The FPL values can be found
Federal Register, Vol. 68, No. 26, February 7, 2003, pp. 6456-6458
based on your income if you put any $$$ into your 401k you get a tax deduction. it is something like if you make under 12,000 and you put any $$$ into a 401k you get a $200 deduction. from like 45k-52k you get a $50 deduction for putting any $$$ into your 401k. this is on top of not having to pay taxes when you put the $$$ in your 401k. this deduction has been available for 2 yrs now.Sylock said:
it came from a housing development that bases your rent on income. a family of 5 is actually 40,975 based on wic numbers. after $47,000 you have to pay the max rent because then you are no longer considered low income. that is just what I got from the government runned apartment complex.blon1360 said:
OK, your talking about the "Retirement Plan Credit" (Line 48 on the 1040) Form 8880 that came out in the JCWAA.
This credit is a minor credit anyway and I find it offensive that Congress has to give a tax credit to encourage people to actually save for their own retirement. Of course, this credit was never advertised so it did not increase the amount of people saving for their retirement, it just gave a little break to those people already saving. So it was another Bush tax cut that did nothing but reduce tax revenue!
..Oh and don't get me started on the "Earned income credit!!!!
Mike, I would be glad to help...
This credit is a minor credit anyway and I find it offensive that Congress has to give a tax credit to encourage people to actually save for their own retirement. Of course, this credit was never advertised so it did not increase the amount of people saving for their retirement, it just gave a little break to those people already saving. So it was another Bush tax cut that did nothing but reduce tax revenue!
..Oh and don't get me started on the "Earned income credit!!!!
Mike, I would be glad to help...
"I find it offensive that Congress has to give a tax credit to encourage people to actually save for their own retirement"
I find it amazing that they have to give incentives too... ie it's amazing how <insert adjective> people are. I think that anyone under 32 (I'm 31 1/2) should not get social security and be made to save for their retirement. I think that people should have incentives to save just because they are <insert same adjective> and wouldn't do it unless forced (broken social security system) or given some benefit (small tax break ... although the amount mentioned above isn't much at all).
Tim, do you not like that tax break because it's a) small b) incentive to save c) not well publicized or d) some combination of the abc? I, for one, think that is a good tax break that Bush gave. The one that I hate, it's also the one I benefit from the most, is the capital gains tax break. The middle class (or what I consider the middle class to be) and above have never needed an incentive to invest, now the goal is just to make money with investments and not work. And the lower class would get great tax rates never the less. Now I understand that investments create jobs so this will help create jobs, but a 4-5% unemployment rate is very healthy for the economy. When the unemployment rate drops to a certain point, the economy is actually hurt very badly. Ie the 10 million new jobs that Kerry is supposed to bring in (which he can't)... even though there are only 8 million unemployed people ... if actually done would create a huge economic disaster.
I find it amazing that they have to give incentives too... ie it's amazing how <insert adjective> people are. I think that anyone under 32 (I'm 31 1/2) should not get social security and be made to save for their retirement. I think that people should have incentives to save just because they are <insert same adjective> and wouldn't do it unless forced (broken social security system) or given some benefit (small tax break ... although the amount mentioned above isn't much at all).
Tim, do you not like that tax break because it's a) small b) incentive to save c) not well publicized or d) some combination of the abc? I, for one, think that is a good tax break that Bush gave. The one that I hate, it's also the one I benefit from the most, is the capital gains tax break. The middle class (or what I consider the middle class to be) and above have never needed an incentive to invest, now the goal is just to make money with investments and not work. And the lower class would get great tax rates never the less. Now I understand that investments create jobs so this will help create jobs, but a 4-5% unemployment rate is very healthy for the economy. When the unemployment rate drops to a certain point, the economy is actually hurt very badly. Ie the 10 million new jobs that Kerry is supposed to bring in (which he can't)... even though there are only 8 million unemployed people ... if actually done would create a huge economic disaster.
good point. why do they need to give an incentive to save $$$? is it because they know social security is going to die out? Yes I know it isnt a big tax credit but with 3 kids and a wife any little bit can help. yes I make more than what is considered low income but doesnt mean it is any easier.
Thanks TIm,
I too get a little freaked at earned income credits. Its needed though I think to even it out with everyone else. I grew up poor and see it from both sides.
I dont know where right and wrong really are in all of this. I know that I pay taxes in addition to what I have removed every week. I hate it and would much rather not fund social programs like social security. I could take that money and stretch it a llot further through priovate investments than the menial amount I will get at age 72 when I can finally collect it! when Im nearly dead from working and the stresses of life!
I too get a little freaked at earned income credits. Its needed though I think to even it out with everyone else. I grew up poor and see it from both sides.
I dont know where right and wrong really are in all of this. I know that I pay taxes in addition to what I have removed every week. I hate it and would much rather not fund social programs like social security. I could take that money and stretch it a llot further through priovate investments than the menial amount I will get at age 72 when I can finally collect it! when Im nearly dead from working and the stresses of life!
When I taught econ a while ago, we use to get updates on SS at the school. Is it still true the average person on SS will get back 100% of their "investment" in a little under 4 years?
When Roosevelt approved the law in 1935 it was designed to go to people over the age of 65. What most people don't know is that in the 1930s, the average life span was between 60 and 63. This "old age insurance" was designed to go to the population who had "outlived" their ability to work.
The truth of the matter is that the leaders of the 1930s never intended for SS to become an "entitlement." It was almost like a reward for a LIFE of hard work in America.
Then in the 1950s and 1960s, congress added numerous groups of people to the list of eligible SS receivers. SS became a very different entity than what it was intended to be.
Today the life span is around 78. When we look at the numbers and find out that people are going to be collecting for 13 years before they get to the average life span we can see where the problem is. If the SS act were passed today with its original intent, Americans would not be receiving SS checks until they were 80 years old.
Please don't misunderstand my intentions. I just wanted to use my history education again. I have not intended to make any political statements one way or the other.
Now here's the political statement: SS needs to be brought back under control or this country will be drowning in a sea of SS payments. I understand that people need support and that we are a compassionate people who cares about its citizens, but we must care about all of its citizens including the under 65 group. AARP will continue to run it commercials and politicians will continue to prop up the disastrous system until we stand up, vote, and get counted. What ever happened to an affordable health care system whereby I was expected to save for my future and take care of my older family members? Its only been in the last 50 years that things have strayed from that path.
Scott
When Roosevelt approved the law in 1935 it was designed to go to people over the age of 65. What most people don't know is that in the 1930s, the average life span was between 60 and 63. This "old age insurance" was designed to go to the population who had "outlived" their ability to work.
The truth of the matter is that the leaders of the 1930s never intended for SS to become an "entitlement." It was almost like a reward for a LIFE of hard work in America.
Then in the 1950s and 1960s, congress added numerous groups of people to the list of eligible SS receivers. SS became a very different entity than what it was intended to be.
Today the life span is around 78. When we look at the numbers and find out that people are going to be collecting for 13 years before they get to the average life span we can see where the problem is. If the SS act were passed today with its original intent, Americans would not be receiving SS checks until they were 80 years old.
Please don't misunderstand my intentions. I just wanted to use my history education again. I have not intended to make any political statements one way or the other.
Now here's the political statement: SS needs to be brought back under control or this country will be drowning in a sea of SS payments. I understand that people need support and that we are a compassionate people who cares about its citizens, but we must care about all of its citizens including the under 65 group. AARP will continue to run it commercials and politicians will continue to prop up the disastrous system until we stand up, vote, and get counted. What ever happened to an affordable health care system whereby I was expected to save for my future and take care of my older family members? Its only been in the last 50 years that things have strayed from that path.
Scott
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