The taxman cometh
2023-Feb-07, Tuesday 09:39![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
dorchadas
I've got some discussion of money including some exact dollar amounts, so I've put this behind a cut:
Point One: I make a average salary but with an excellent benefits package and high retirement contributions, which means two things. The first is that my AGI was around $43K last year, and the second is that even though Laila's medical treatment cost literally hundreds of thousands of dollars--$364,637.16 according to the calculations I just did--insurance reduced that to $2997 and I don't think I paid all of that.
Point Two: Due to a variety of reasons, among them moving to Japan in 2008 one month before Lehman Brothers collapsed, being paid in yen during a period where the yen went from ¥112 to the dollar to ¥77 to the dollar, my parents always being scrupulously fair when giving any monetary gift to either child to match the amount with the other one, andschoolpsychnerd giving me literally our entire fortune and assets in the divorce (I guess some good came of being married to someone with BPD symptoms), I have significant stock investments. I just checked and this morning their value is $325,899.01 in a mix of retirement and non-retirement accounts, and this does not include my home equity (which is currently about $70,000, not sure of the exact amount).
In the grossly overcomplicated and citizen-hostile American tax code, there's something called the "Earned Income Tax Credit," where the government gives people with children money if their income is low enough. Unlike a lot of tax credits, this one is "refundable," meaning that it can lower your taxes into the negative and you get extra money. We got it last year, which meant that we got something like $5,500 from the government back last year (and then spent all of it on Laila and![[instagram.com profile]](https://www.dreamwidth.org/img/profile_icons/instagram.png)
sashagee's health costs). There's a bunch of rules about who it applies to, but the cutoff for a head of household who has one child filing is that AGI must be $43,492. Alright, I just slipped under that, right?
Well, not so fast. Remember that surprise ten percentage raise I got last year? That pushed my income to almost the cutoff, and then those six figures of stock investments also produced dividends. $2500 worth of taxable dividend income, in fact, which means my AGI is now $1500 above the EITC cap, which means that by making more money I now make less money. Slightly less--the EITC for one child is $3,733, which is less than the raise I got--but with my savings drained thanks to medical expenses we could have really used that $3,733.
There is essentially nothing I can do about this. There are a lot of ways to reduce your owed taxes in the American tax code but there are very few ways to reduce your AGI and basically none of them apply retroactively. My contributions to my work retirement account did it, but not enough. Paying student loan interest reduces it but interest has been paused now for years, andsashagee has paid off almost all of her student loans anyway so there wouldn't have been enough interest. I'm not in the military and we don't have an HSA (the dystopian American concept of a tax-advantaged account where you can save a ton of money to pay for those $364,637.16 health bills). We're basically stuck.
It's not financially crippling, fortunately, since I do have that large amount of money in stocks. If absolutely necessary I can sell some. But it's very annoying and adds a lot of financial stress. Most programs gradually phase out specifically so this kind of situation--by making $2500 I lost $3733, so I'm financially incentivized to work less--doesn't happen.
Point One: I make a average salary but with an excellent benefits package and high retirement contributions, which means two things. The first is that my AGI was around $43K last year, and the second is that even though Laila's medical treatment cost literally hundreds of thousands of dollars--$364,637.16 according to the calculations I just did--insurance reduced that to $2997 and I don't think I paid all of that.
Point Two: Due to a variety of reasons, among them moving to Japan in 2008 one month before Lehman Brothers collapsed, being paid in yen during a period where the yen went from ¥112 to the dollar to ¥77 to the dollar, my parents always being scrupulously fair when giving any monetary gift to either child to match the amount with the other one, and
schoolpsychnerd giving me literally our entire fortune and assets in the divorce (I guess some good came of being married to someone with BPD symptoms), I have significant stock investments. I just checked and this morning their value is $325,899.01 in a mix of retirement and non-retirement accounts, and this does not include my home equity (which is currently about $70,000, not sure of the exact amount). In the grossly overcomplicated and citizen-hostile American tax code, there's something called the "Earned Income Tax Credit," where the government gives people with children money if their income is low enough. Unlike a lot of tax credits, this one is "refundable," meaning that it can lower your taxes into the negative and you get extra money. We got it last year, which meant that we got something like $5,500 from the government back last year (and then spent all of it on Laila and
sashagee's health costs). There's a bunch of rules about who it applies to, but the cutoff for a head of household who has one child filing is that AGI must be $43,492. Alright, I just slipped under that, right?Well, not so fast. Remember that surprise ten percentage raise I got last year? That pushed my income to almost the cutoff, and then those six figures of stock investments also produced dividends. $2500 worth of taxable dividend income, in fact, which means my AGI is now $1500 above the EITC cap, which means that by making more money I now make less money. Slightly less--the EITC for one child is $3,733, which is less than the raise I got--but with my savings drained thanks to medical expenses we could have really used that $3,733.
There is essentially nothing I can do about this. There are a lot of ways to reduce your owed taxes in the American tax code but there are very few ways to reduce your AGI and basically none of them apply retroactively. My contributions to my work retirement account did it, but not enough. Paying student loan interest reduces it but interest has been paused now for years, and
sashagee has paid off almost all of her student loans anyway so there wouldn't have been enough interest. I'm not in the military and we don't have an HSA (the dystopian American concept of a tax-advantaged account where you can save a ton of money to pay for those $364,637.16 health bills). We're basically stuck. It's not financially crippling, fortunately, since I do have that large amount of money in stocks. If absolutely necessary I can sell some. But it's very annoying and adds a lot of financial stress. Most programs gradually phase out specifically so this kind of situation--by making $2500 I lost $3733, so I'm financially incentivized to work less--doesn't happen.
