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 ago
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    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.

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  • 7 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.

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  • 7 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.

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  • Anonymous
    7 years ago

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

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