Low Wage Living - Episode 2 - Death and Taxes

Nothing in life is more certain than Death and Taxes.

So even though we aren't in the Mc Mansion the tax man is still going to want a piece of the action.  The goal is to keep their grubby mitts off as much of your hard earned money as possible. The way that we do this is to be aware of the tax laws that affect us and then planning around those.



The Standard deduction is 12,000 dollars which means that we will pay a big fat 0 on federal taxes on our first 12,000 dollars. Every dollar you make over 12,000 your going to be paying taxes on, specifically 10% - for the first 9,700. 10% isn't actually that bad in the grand scheme of things.and then it goes up from there a whole 2% to 12% until $39,475. At that point it jumps to 22% so we want to try and keep our taxes low and as close to 0 as we can get.

Now the unfortunate part is that you don't get off Scott free on that first 12,000. Tax man wants those Social Security and Medicare taxes. So even though you should make - $15,080 you really end up with $13,926.38 that is because Social Security - 6.2% and Medicare 1.45% get taken out.

You have a choice at this point in order to protect it from taxes you would need to put 3,080 dollars into a 401k/IRA/HSA or used in a tax advantaged way, for health care, life insurance etc. Alternatively you can take the 10% hit and go for a Roth IRA at the end of the year. This is the choice I would go for as the Roth option is amazing and I would want to start the 5 year Timer starting. It also allows for flexibility if something where to happen in the first year.

The good part is that you don't have to get that creative, the bad part is there isn't all that much to get creative with.