I was curious if anyone knew the calculation of how much I would have to increase my 401k contribution by in order to lower by tax bill by $2800. Gross salary of $48000 and currently contribute 6% to 401k. If you could show your math that would be excellent. Thanks!
There are multiple things I don't know. Provided your company will accept a contribution, here are some numbers to start
Gross Income: 48,000
Less 6% 401K -2,880
Net Income 45,120
Less Deduction -12,200 Single Standard deduction
Taxable Income 32,900
This puts you in the 12% bracket
$2,800 / 12% = $23,333 to get that level of tax deduction
Of course, though, an elective deferral of a total of $26,213 in 2020 would be beyond the permissible amount, even for someone age 50 or over in 2020.
However, with AGI below $65,000 filing single, you could make a deductible traditional IRA contribution for 2020 as well. That combined with a maximum elective deferral would get you to your goal if you are age 50 or over, but not quite if you will not have reached age 50 by the end of 2020.
With income falling in the 12% tax bracket, it might make more sense to make contributions to a Roth account instead of to a traditional account and pay taxes on that money now to be able to have the investment gains be tax-free later.
I owed $1500, which using my stimilus rebate as credit helped to pay underpayment. My spouse and I file married jointly and file 1 each. To eliminate future underpayment do I increase additional tax payment or increase 401k contributions.