Robert is a mortgage broker and receives all of his income as wages on a W-2. He has some non-reimbursed expenses that he deducts as well as mortgage interest, property taxes, and some charitable contributions.  He is married, his wife does not work, and they have 2 children.  Robert and his family live in a state with an income tax rate near 5.0%.  Robert implemented this tax strategy in 2016 and plans to use it each year until he retires.  His income is expected to increase each year, but could also decrease.  The strategy he is using is flexible annually to accommodate his income fluctuations.

 

Below are their ACTUAL numbers from their personal income tax return for 2016 and the estimated numbers based on their tax projection for 2017 before the tax strategy and after the strategy was implemented.

 

2016 Actual Before After
W-2 Earnings (Box 1) $618,282 $618,282
AGI (Adjusted Gross Income) $604,467 $604,467
TI (Taxable Income) $550,936 $279,937
Federal Tax $163,837 $67,792
AMT (Alt. Minimum Tax) $0 $4,432
Other Tax $3,478 $3,478
Total Federal Tax $167,315 $75,612
State Tax $26,591 $14,191
Total Income Tax $193,906 $89,803

Robert received a refund for 2016 of $128,121 ($114,675 Fed & $13,446 State)

 

2017 Projected Before After
W-2 Earnings (Box 1) $624,740 $624,740
AGI (Adjusted Gross Income) $625,098 $625,098
TI (Taxable Income) $553,640 $243,626
Federal Tax $164,472 $55,614
AMT (Alt. Minimum Tax) $0 $5,029
Other Tax $3,536 $3,536
Total Federal Tax $168,008 $64,179
State Tax $25,958 $11,722
Total Income Tax $193,966 $75,901

Robert will receive a refund for 2017 of  $149,087 ($132,967 Fed & $16,120 State)

Year 1 Savings:  $104,103

Total Savings: $118,065

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