# How much pmi and loan interest to lower my tax bracket?

Okay, so I make $50,000 a year. I'm currently putting 4% of my income into my 401k (pretax). I'm attempting to lower my tax bracket so I'm looking into whether or not a FHA loan for my new home will be better and to just pay the PMI in order to use this as a tax deduction (currently able to in 2013). This in turn would return to me about $5000, which is more than I would pay in PMI. Can someone please let me know how much interest and pmi I would have to pay yearly to get me into the 15% tax bracket assuming I put 4% into my 401k? I am single, independent, but not head of household.Thank you!!

the pmi would amount would be about 2800 ... 5000 is the minimum refund I would get by getting my tax bracket reduced by 10% ... I would gain 2200. I'm trying to determine whether I can even get into the lower tax bracket.

### 4 Answers

- 7 years agoBest Answer
It's never better to pay more for yoru house than you have to. Ever.

Your money is taxed by the bracket it's in, not your highest bracket. Only the amount above a certain bracket level is taxed at that rate.

If the minimum refund you woul dget is $5000, then you should adjust yoru W4 and put more money in your 401K instead of giving the government an interest free loan.

- StephenWeinsteinLv 77 years ago
You would not get a $5000 refund. You would not gain $2200.

Lowering your tax bracket does not lower your tax on all of your income. It only lowers your tax on a small amount.

Your tax is already 15% (or less) on the income that would be taxed at 15% if you lowered your bracket.

The 25% rate only applies to the income that puts you into the 25% bracket.

For example, if you needed to get your income down to $45,000 to be in the 15% bracket, and your income was $50,000, then only $5000 would be taxed at 25%. The rest would be taxed at 15% or less. Lowering your income to $45,000 would only save you 25% of $5000 (which would be $1250). The other $45,000 would still be taxed at the same rate as it is now, and you could not get $2200 or $5000 or whatever other number you calculated.

- ninasgrammaLv 77 years ago
Since you put 4% of your income into a 401k, your wages subject to tax are $48,000.

It is true that you are in the 25% tax bracket. This does not mean that you pay 25% of your wages, or $12,000 in federal tax. Nor does it mean that should you be able to reduce your tax bracket to 15%, that you would save 10% of $50,000, or $5,000 (or $4,800 if you figure your wages as $48,000).

With income of $48,000, your taxable income is $38,000 using the standard deduction of $6,100 and one exemption of $3,900. The 25% tax bracket starts at taxable income of $36,250. So you pay 25% tax on $1,750. The rest of your income is taxed at a maximum of 15%.

If you had itemized deductions of $7,850, you are now in the 15% tax bracket, and you have reduced your tax by 25% of $1,750, or $438.

If you had itemized deductions which were $2,800 over the standard deduction, or a total itemized deductions of $9,900, you would save $595 because only part of the $2,800 would have been taxed at 25%, the rest is taxed at 15%.

If you want to get out of the 25% tax bracket, see if you can put an additional $1,750 into your 401k. You would increase your 401k by that amount, and decrease your taxes by $438, so the additional contribution reduces your take-home pay by $1,312.

- Anonymous7 years ago
Spending $5000 to get are refund of $1250 is not a win/win situation.