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Low income

1222 Views 23 Replies 10 Participants Last post by  ofblong
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.
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Sylock said:
401K tax break? Do you mean the fact that 401K money isn't taxed? If so there is no cut off for that. What tax break in regards to 401K do you think you are missing?

I'm not a tax consultant, but I'm a money guy.
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.
blon1360 said:
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
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.
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.
Mike said:
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!
That is my thoughts exactly. It looks like my company is going to allow us to put $$$ away into the michigan education whatever college fund and it will be a payroll deduction. Only problem I see is it basically only works if your children go to college in michigan. now I dont know that much about the program so I will be going to an info meeting my company is providing but still if it is as good as alot of people say then Id rather take that ss $$$ and put it into somethign that will give me more when I either retire or the kids go to college instead of when im almost ready to croak.
I think it is the met that my employer is going to give us a free seminar on but cant remember off the top of my head. my oldest has 15 yrs till he turns 18.
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