Tax Freedom day is coming up this Sunday, April 24th. The idea behind tax freedom day: “How long would it take us to earn enough money to pay our nation’s total tax bill for the year?” Well it takes 114 days this year, landing on April 24th, they exclude leap days so it’s easy to compare between the years. 31% of our nation’s income is in some form, taxed. taxfoundation.org
There were interesting facts like, American’s as a whole:
- will pay more taxes than they will spend on food, clothing and housing combined.
- paid only 5.9% on the nation’s income in taxes in 1900 vs 31% this year.
- My personal state of Wisconsin is taxed so high our tax freedom day is April 27th and 40th state to get to “tax freedom day” this year.*
I earned roughly $59900 this year and because I’ve been improving my tax game, mainly through aggressive retirement account saving, my tax bill was just above 18% and I’m pretty sure there’s decent room to improve if I knew the complex web of tax law.
Last year I really started the retirement game, right before I paid 2014’s taxes I put $5500 into a Roth IRA.
- I put $5500 into 2015’s Roth IRA and just under $12,500 into my work’s SIMPLE IRA.**
- I write off my student loan interest which is all low interest and can be written off even if you do standard deduction.
- write off my home’s property taxes.
- write off HSA(Health Savings Account) contributions.
- small tax help from adding a ton of insulation to my home’s attic.
*Wisconsin is 40th? I knew it was high, it’s just weird being constantly reminded that Wisconsin has lower average income than many states and higher tax. Yes it’s decently low cost of living, but there are other states that are as low or lower with a decent kick of higher average income.
** I plan to max out my SIMPLE IRA again for 2016 and max out a traditional IRA. My new plan is to max out traditional IRA’s every year to get my tax bill down further and I’ll slowly convert them to Roth IRA’s in the event I retire early.
Afterthought: I think any forced payment for merely existing is really a tax, so personally I will consider the new Health care system a tax, just not a very well defined tax that oddly goes through private insurance companies. Did you know Colorado was the only state that actually saw lower health care premiums? I think mine in Wisconsin went up 50%+.
What was your tax damage?