30 Jul Managing higher taxes with a new job

 Q. I’m up for a new job that would bring my salary from $75,000 to about $130,000. My wife earns $60,000. We’re wondering what tax preparations we should make for a higher income? How can we lower our tax bill?

A. Good luck with the new job, and you’re right: your taxes will rise with higher income.

Going from $75,000 per year to $130,000 is a 73 percent jump in income, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

Kiely ran this projection: Let’s assume you and your wife live in an apartment and take the standard deduction. You also have no kids. Your combined federal income tax would be $20,388 and your New Jersey income tax would be $4,573. When your pay jumps to $130,000 your combined federal income tax will jump to $34,763, an increase of $14,375. Your New Jersey income tax will jump to $7,933.

“You should look at your combined withholdings to see if they are adequate enough to cover you’re your tax bill,” Kiely said. “If it looks like not enough is being withheld, you can put some money aside for April 15 or have your withholdings increased.”

Another way to minimize the damage, Kiely said, would be to make sure you maximize your 401(k) contributions, which lowers your taxable income.

Gail Rosen, a Martinsville-based certified public accountant, said there are other strategies to increase your deductions.

“Evaluate whether it is a benefit for you to buy or rent you principal residence,” she said, because owning will give you deductions for mortgage interest and property taxes.

Then, keep track of all monetary charitable donations.

“Clothing and household goods you contribute can qualify as a tax deduction and needs to be properly valued at the lower of cost or fair market value,” she said. “You can also deduct 14 cents for each mile you drive on behalf of a charity.”

Be sure to also keep track of medical expenses, job hunting costs, employment-related expenses, investment expenses and tax preparation fees, Rosen said. If you have enough of these expenses in one year, they may qualify as a tax deduction.

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This story was first posted in July 2015.