Less Income = More Disposable Cash
I participate in quite a few forums. The increase to taxes has been a hot topic on just about every forum I participate in. While taxes on everyone have gone up for most of us and we are now expected to make due with less nothing has happened to entitlement spending. While entitlements may not seem like a big deal to many people, if you’re a tax payer they probably should. I decided to crunch a few numbers and show a comparison that demonstrates just how entitlements work.
Example 1: Single mother with 3 children who earns $25,000 per year and receives $500.00 per month in child support. Because of her low income she receives subsidized housing that also includes utilities. She receives EBT of $300.00 per month(Food stamps), government funded healthcare and government subsidized childcare. (example 1 is a real person and these are actual figures)
Figures below are monthly
Gross Income $ 2,083.33
Child Support $ 500.00
SS and MC $ (159.37)
State Tax $
Fed Tax $
Insurance $
__________________________
Total Net Income $ 2,423.96
Housing $ (325.00)
Food $ (200.00)
Child Care $ (160.00)
Utilities $
__________________________
Disposable income $ 1,738.96
Example2: Single mother with 3 children who earns $55,000 per year and receives no government benefits.
$55K Earned Income
Gross Income P/R $ 4,325.00
Child Support $ 500.00
SS and MC $ (330.86)
State Tax $ (113.60)
Fed Tax $ (307.83)
Insurance $ (250.00)
__________________________
Total Net Income $ 3,822.71
Housing $ (975.00)
Food $ (500.00)
Child Care $ (2,400.00)
Utilities $ (200.00)
__________________________
Disposable income $ (252.29)
Here is where the fun really starts.
Example 1 qualifies for the earned income credit. The max earned income credit benefit for a single income earner with 3 children is $5,891.00 per year. Example 1 also qualifies for a dependent care tax credit of $556.80 per year giving her an additional $6,447.80 of disposable income each year.
Example 2 does not qualify for the earned income credit. Example 1 does however qualify for the dependent care tax credit which will give her a tax credit of $1,200. The $1,200 is still not enough to cover her monthly deficit of $252.59.
Re: Less Income = More Disposable Cash
Quote:
Originally Posted by
Dave
So going to college and getting a degree was a waste of my time then? [Bang]
Not a waste of time, you just had to work harder to end up with less than those that don't give a rat's ass. I mean someone has to pay for the entitlements, might as well be you.
Less Income = More Disposable Cash
Quote:
Originally Posted by
anomad
Is 2400 a month realistic for child care?
Yup. In fact it's about middle of the road. $200 per child per week. If you send your kids to a Primrose or comparable facility it's around $325 per child per week.
Less Income = More Disposable Cash
Quote:
Originally Posted by
Dave
Well, with 3 kids she would likely claim 4 exemptions. Though my spreadsheet and paycheckcity.com show a monthly pay of 2083 and 4 exemptions in CO to pay about 60 in fed taxes and 31 in state each month. Not going to say what my federal witholdings were last year. [Rant1]
Example 1 can claim exempt on her W4 and still receive a refund at the end of the year due to EITC and the Dependent Care Credit.
Example 1 would qualify as head of household providing an $8700 standard deduction. Example 1 would also qualify for 4 exemptions at $3650 a pop that equates to $14600. This means example 1 only has around $1700 of taxable income. Even taxed at say 10% that's $170 which would simply be deducted from the tax return of over $6K.
