Cool! I was just trying to confirm my methodology, as the rates/tiers change every so often. 

Thanks!

Roy

Roy, your methodology on the brackets is correct.

The Brackets listed above are for single taxpayers.  Here are the 2014 brackets for Married Filing Jointly from the same link:

• 10% on taxable income from $0 to $18,150, plus
• 15% on taxable income over $18,150 to $73,800, plus
• 25% on taxable income over $73,800 to $148,850, plus
• 28% on taxable income over $148,850 to $226,850, plus
• 33% on taxable income over $226,850 to $405,100, plus
• 35% on taxable income over $405,100 to $457,600, plus
• 39.6% on taxable income over $457,600.

Of course, Gross Income can be reduced by IRA contributions and other deductions to get Adjusted Gross Income.  Then you subtract your Standard Deduction ($12,400 for Married Filing Jointly in 2014) or Itemized Deductions (most full-timers don't have enough to use Itemized) and your Personal Exemption ($3,950 per person in 2014) to get Taxable Income.  THEN you use the brackets.

So, $80,000 Gross Income - $0 Deductions = $80,000 Adjusted Gross Income.  $80,000 AGI - $12,400 Standard Deduction - $7,900 Personal Exemptions = $59,700 Taxable Income.  Now, using the above brackets, your example tax would be $8,047.50.

Of course, an easier method is to plug numbers into an online tax calculator like this one:  https://www.calcxml.com/calculators/federal-income-tax-calculator 

You probably know all that, but I'm doing the example for others than might be reading this thread.

At $80,000, using your example, some people might say "That puts you in the 25% tax bracket", when in fact, you would only pay about 10% without doing anything at all to try to reduce your tax liability.  And, it would be even less if you had deductions for qualified IRA or Health Savings Account contributions, etc.

Of course, that example assumes the $80,000 is "ordinary income".  If it includes income from certain dividends and investment sales, things get a bit more complicated.     

Ditto, Roy. I had a blank spot in our budget calculations for taxes with a rough guess of 10% of income set aside. It was one of those I'll figure that one out later kind of things.  Now I have a higher confidence in that category based on more complete info.  Thanks Howard. 

 

-- Edited by biggaRView on Tuesday 22nd of April 2014 07:29:25 AM

EBendana wrote:

---

This is for EARNED income, if your income is from DISTRIBUTIONS from retirement or pension, that its only 15% tax on the first 72K (for married filing jointly)

---

 Not necessarily.   It depends upon what type of retirement account or pension plan you have.   If the retirement accounts are from a 401k, 403b, or an IRA, then they are taxed as normal earned income, because the tax was deferred when you were working.   If it is from a Roth IRA, then no taxes, as you paid them when you earned the money.   If from dividends, etc., then the 15% may apply.   And when you start taking Social Security, then a portion of that will also be tax.

 

Barb

 

you should still file jointly......you still get the deductions and a lower tax bracket

Trace, the 25% only applies to the portion of your income that is above the 73,800 but not above 148,850 for a joint return.  Above that the rate is higher and so on up the income scale. Below 73,800 but above 18,150 is taxed at 15% and the first 18,150 of income is taxed at 10%. Those dollar amounts refer to taxable income.(amount after deductions)

In Howard's example, 80,000 income yields 8047.50 in taxes but if, say, you made an additional 1,000 dollars your total tax would increase by 250 dollars or 25% of 1,000 dollars(because that extra money was in the bracket between 73,800 and 148,850 dollars.

 

-- Edited by biggaRView on Wednesday 23rd of April 2014 08:16:00 AM

-- Edited by biggaRView on Wednesday 23rd of April 2014 08:17:22 AM

Roy,

Yes, it's better if you still file jointly.  That way your brackets are better - the higher rates kick in at higher income levels AND you get the additional benefits of the married filing jointly standard deduction and a personal exemption for her.

That was a terrific explanation!!! Thank you so much...I think I actually get it now :) It's good to know the higher tax rate is on the difference and I can't imagine that after HSA. IRA, and business deductions I would ever get into the 25% anyways.

I am really trying to get a handle on this in advance because this year due to changing the state I work in and refinancing the house we didn't have enough deductions to itemize and got whacked with an unexpected $4K tax bill. I don't mind paying my fair share, but I hate getting surprised and having to scramble at the last minute to get the liquid cash.

We are planning on paying an estimated amount quarterly...you can do it online and it looks super simple. Thanks again...much appreciated !!!

Here is something I have been wondering about. It is my understanding that IRA contributions must be from earned income. I am thinking earned income is just that, income for services performed. So pension, social security and 401k distributions along with investment income would not qualify as income to make an IRA contribution.

Example: $50,000 in adjusted gross income as follows:
1. Workamping - $4,000
2. Investment income - $6,000
3. Pension distribution - $24,000
4. Social Security distribution - $16,000

You would only be eligible to contribute $4,000 to an IRA.
Is that correct?

biggaRView wrote:

PS: Trying to avoid paying taxes is not a reason to limit income. The IRS will just take a higher portion as your income increases from one bracket to the next. The only reason to not earn more is if the effort needed to produce it exceeds what you get from it or, the time needed to earn it sufficiently cuts into the time you have alloted for other activities that you can no longer enjoy them.

_________________________

This is correct... however, another situation where it's important to understand this concept is when you are withdrawing money (in retirement) from your standard (i.e., non-Roth) IRAs and 401k.  Since we'll be living on these plans when I retire this year (yay!), I want to be smart about withdrawals toward the end of the year.  Once I near the next bracket, it might be smart to make an effort to differ the withdrawal until the following tax year to net more money.

Good discussion!

Ron

 

 

Thanks Howard, I guess I need to figure out a way to earn some income this year! I was hoping I could do it without working. :)

Howard, if we camp host, or volunteer for a camping space, are we into self-employment land? We are starting to hear about fulltimers having to file state tax returns in two or three states each year if they move around and camp host. We are reluctant to get into a crazy taxation situation if we don't have to, but I want to make sure we understand correctly. Are the thousands of camp hosts out there filing tax returns in each of the states they work in?

Thanks again for all your advice!

Roy

If you are camp hosting for a governmental agency or non-profit, then the camp site is there to allow you to VOLUNTEER for the organization. If it is a for profit park, then the camp site is in lieu of wages and taxes are owed. Thousand Trails got taken to task for not providing the Feds information on earnings of workers.

Barb

Roy,

I'm hesitant to answer in this thread because we're getting way off topic.  But it looks like that ship has already sailed, so here goes.

If you are workamping and earning pay above and beyond your campsite, that income is taxable.  You should be a W-2 employee and state and federal taxes should be withheld.  If you want to get a refund of state taxes, you would have to file a return in the state you worked (assuming it is a state with state income tax and state taxes were withheld).  So, if you work in two or three states a year (and they all have state income tax) and you get paid, yes, you would likely have to file a return in each state.  BUT you would not be "self-employed".  (Lots of full-timers refuse to work for pay in states with income tax just to avoid the hassle.)

If, however, they are paying you cash or paying you out of "accounts payable" and they issue you a 1099, now you are an independent contractor (not common, but it does happen) and you may report it as Miscellaneous income on your 1040 OR you could report the income on Schedule C in which case you would be self-employed.  I would only report it on Schedule C if you have other income from other sources and you need to offset your total income against business expenses.

If you are working as a volunteer for a government entity and all you are getting is a campsite, there is generally no tax consequence.

If you are working for a private employer and you are getting a campsite (with or without additional pay), the "value" of your campsite MAY be taxable.  The following three conditions must be met to make the campsite value non-taxable to you.  From the IRS website on taxable "fringe benefits" from the employer viewpoint:

Lodging on Your Business Premises

You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests.

 

Every year I get at least one email or phone call from someone that got a 1099 for the value of their campsite that they weren't expecting, so it's always a good idea to have the employer tell you in advance, in writing, whether or not the value of your campsite will be taxable.

We discuss all of this and more in our "Working On The Road" seminars.  Hope that helps a little.

-- Edited by Howard on Thursday 24th of April 2014 01:14:48 PM

Howard wrote:

---

.....If you are working as a volunteer for a government entity and all you are getting is a campsite, there is generally no tax consequence.

If you are working for a private employer and you are getting a campsite (with or without additional pay), the "value" of your campsite MAY be taxable.  The following three conditions must be met to make the campsite value non-taxable to you.  From the IRS website on taxable "fringe benefits" from the employer viewpoint:

Lodging on Your Business Premises

You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests.

• It is furnished on your business premises.

• It is furnished for your convenience.

• The employee must accept it as a condition of employment...... 

---

As an interested spectator, since the train of thought on this thread has already derailed, lets spread the resulting wreck further into the corn field and ask... and because I'm still confused a bit...

 By lodging, are you referring to a physical structure/other living space or does the definition of lodging also mean a campsite with nothing more than a place to park your rig and hook up to provided utilities?  In my mind it doesn't since I would be providing the "lodging", but then I am not the IRS. We'll definitely be attending one of your "Working on the road" seminars when we actually start this adventure.

Brian

Brian,

Certainly, the law was probably written for physical structures, but "lodging" is not defined.  There is no difference between having dorms on site for seasonal college students and providing a campsite for seasonal workampers under the intent of the provision.

Yes Brian, that is correct.  But I don't know if even an "iron-clad" contract will help if the IRS determines the employer's position is wrong.  It gives you a darn good argument, but if the IRS says you owe, then you'll owe. 

A camphost for a private employer is a good example.  A camphost would need to be on the employer's premises, it would be for the convenience of the employer, and it would be a condition of getting the position.  That last criteria can get employers in trouble.  If a workamper holds a position doing reservations, and there are other local employees that live off-site performing the exact same duties, then "living on the premises" wouldn't be a condition to getting the position.

Of course, I doubt anyone is looking that closely at the smaller private employers, but it might trip up the bigger ones.

Here's where I think the stray 1099s at the end of the year come from.  Mom & Pop Campground turns over their financial records to their accountant at the end of the year.  The accountant says "How come there was no income on those three campsites?"  "Well, we had workampers on those sites", Mom & Pop say.  The accountant says "That's lost revenue to you because those sites could have been rented.  If we characterize the value of those campsites as compensation, we can deduct that amount from your revenue and lower your net income and your taxes a little.  BUT, you will need to send the workampers a 1099 as evidence of this business expense."  Of course, that's just the scenario I play out in my head, but it's usually in January or February every year when I get the emails about this.

And "yes", it does get more complicated if you are an independent contractor ... for several reasons.  But that's another thread.  Time to put this one to rest before we go off on another tangent.   

Ellen,

Not necessarily.

You can report it as Miscellaneous Ordinary Income on your 1040.  If it's not a lot of income, that's probably the best thing to do.  BUT if you earn a good amount of income and you have a large amount of expenses related to generating that income, then it becomes beneficial to offset the income and expenses using Schedule C.  It's a balancing act.

We're trying to avoid paying too much in income tax or too much in self-employment tax.  However, it may be a good thing to pay self-employment tax (Social Security & Medicare).  Remember, your Social Security benefits are based on the average of your highest 35 years of earnings.  If you don't have 35 years of earnings, like we didn't when we started, then each year you don't have earnings for which Social Security tax was withheld you get a big fat ZERO averaged in.  By having business income and paying self-employment taxes, in our case, we improve our Social Security benefits a little bit.

So, if all your income is coming from 1099 sources, then it might be best in your situation to just report it all as Miscellaneous Ordinary Income ... IF you don't end up having to pay a lot of additional income tax at the end of the year (because no taxes were withheld and you can't offset the income with expenses).  IF you end up having to pay a lot of additional income tax (and possibly penalties), then you may end up having to pay quarterly estimated taxes.  But, there may be other reasons to establish a "business" and report income and expenses on Schedule C and pay self-employment taxes.

Again, it's different for every situation and it can get a little complicated.