FrugalFringe.com http://www.frugalfringe.com Growing the Frugal Fringe—One Household at a Time Mon, 14 Aug 2017 17:11:30 +0000 en-US hourly 1 https://wordpress.org/?v=4.8.1 47195129 How to Buy an Audiophile Stereo System for Under $750 http://www.frugalfringe.com/uncategorized/how-to-buy-audiophile-stereo-system-for-under-750/ http://www.frugalfringe.com/uncategorized/how-to-buy-audiophile-stereo-system-for-under-750/#comments Mon, 19 Jun 2017 09:30:03 +0000 http://www.frugalfringe.com/?p=6888

For decades, I wanted a kick-ass stereo system. I’d visit emporiums to hear glorious setups that were priced like down payments on McMansions. I’d attend audiophile expos to gawk at glistening speakers that cost more than luxury sedans.

I really, really wanted to buy into this world of great sound. But somehow the cheap part of me always prevailed—while I loved hearing such wonderfully rendered music, I also detested the heavy cost. So for years I lived without luxurious audio.

That is, until this year.

As I write this post, I’m hearing Fritz Reiner guide the Chicago Symphony Orchestra through Respighi’s The Pines of Rome. The sound is light years ahead of my college-poor stereo from the 1980’s. And to my ears it comes very close to what I’ve heard at high-end stores.

This new system cost $740.80—a pittance that lifts me into the sonic stratosphere without exposing me to stratospheric expense.

How did I sneak into audio chic so cheaply?

I did it by resorting to one of the oldest entries in the frugal playbook.

I downsized.

Instead of speakers, I chose headphones. Instead of a house-shaking amplifier, I chose a smallish headphone amp. Instead of a CD player or phonograph, I chose a FREE media player to install on my laptop.

My lilliputian setup delivers spectacular sound at a spectacularly low price—hear now the blissful details!

Sennheiser HD600 Headphones: $224.50

These top-rated headphones are a long-time audiophile favorite. I bought my pair used on eBay. They arrived with two sets of cables: one with a standard ¼-inch jack and the other with a balanced XLR four-pin plug. My ears prefer the four-pin, which does a slightly better job of keeping the sound separated into two distinct channels.

Schiit Jotunheim Headphone Amplifier: $516.30

Pronounced just like you think, Schiit is the baddest word in headphone amps. I picked the Jotunheim model with an on board Digital Audio Converter (DAC). The amp measures 9″ by 6″ by 2″ and delivers plenty of power to the headphones. To protect my hearing, I never crank the volume knob more than half-way up (so in the future my ear drums will still hear drums).

MediaMonkey Music Player: FREE download

Media Monkey organizes my music and plays tracks from my hard drive. I ripped a big chunk of my CD collection onto my laptop as WAV files. I also downloaded higher density FLAC files from HDTracks.com.

Don’t Take My Word For It

I think my setup delivers amazing value, but I’m no audio expert. So instead of blogviating about how awesome everything sounds—my grateful ears have never been happier—I refer you to this video review of my exact system, i.e., the Schiit Jotunheim and Sennheiser HD600 headphones.

The reviewer, a headphone expert who goes by the name Zeos, uses a Go-Pro camera that makes me seasick as he moves his head from port to starboard. But the good new is that he’s entertaining and persuasive. Now that I’ve listened to the equipment myself, I think his conclusions are spot on.

Dubious About Risking $750 for Equipment You Might Dislike?

I share your trepidation.

Unless you happen to know someone who owns this particular setup, there’s no free way to try before you buy.

However, if you buy this setup and don’t like what you hear, you can still get most your money back. As to the Jotunheim, Schiit allows returns within 14 days for a 5 percent restocking fee plus mailing costs. On the DAC model this means you’d pay about $40 for a home audition that lasts a full fortnight. As to the HD600s, there’s a healthy demand for used models so you can always sell them back on eBay at little or no loss.

Helpful Hints for the Cheapish Audiophile

HQ Music on YouTube. Search for “HQ,” “HD,” or “audiophile” music. This is FREE listening with infrequent ads that you can bypass after five seconds. Some of my favorites for fantastic sound:

2+ Million Collected Songs. This obscure Amazon Prime feature is a great bargain. And unlike YouTube, there are no ads. To learn more, click here.

Free Downloads at HDTracks.com. Among audiophiles, a fierce debate rages over whether the human ear can discern any difference between CDs and the higher density files that HDTracks peddles. Decide for yourself by downloading these FREE samplers:

Hi Rez from HDTracks.com. I purchase online only when there’s a big sale. Because even discounted downloads are expensive, I preview the full albums on YouTube or Amazon Prime before I buy. Here are my favorites:

  • Jazz at the Pawn Shop–Arne Domnerus et al. Wikipedia reports that this live album “is widely regarded by audiophiles as the best jazz recording of the 20th Century.” For good reason. I feel I’m actually in the room on one of those cold Stockholm nights in December, 1976 when the music was played. In addition to the fantastic combo, I hear snippets of audience conversation, waiters shuffling about, and clinking glasses—Brännvin anyone?
  • The Master–Candido Camero. This 92 year old conga player still gets after it—fascinating rhythms. Incredible sonic detail.
  • Mussorgsky Pictures at an Exhibition–Fritz Reiner, Chicago Symphony Orchestra. Once upon a time, Chicago’s Orchestra Hall was a recording paradise, but a 1966 renovation killed the acoustics. Fortunately, in this 1950s recording the brass section blares with outstanding clarity.
  • Afro Bossa–Duke Ellington. The Duke is so cool!
  • What’s Going On–Marvin Gaye. Marvin’s magnum opus.
  • LA Woman–The Doors. In Riders on the Storm, you’d swear the Hammond organ is getting drenched in a downpour.
  • The Raven–Rebecca Pidgeon. Many wonderful tracks, the most popular of which is Spanish Harlem, a song penned by Phil Spector.
  • The World Is a Ghetto–War. Very clear separation on a wide sound stage. Sounds like a dozen or more percussionists are playing.
  • Some Other Time–Bill Evans. I’ve enjoyed other recordings made at this small recording studio located in the Black Forest of Germany (for the well-respected MPS label). A mellow jazz combo takes on 21 American standards.
  • Getz-Gilberto–Stan Getz and Joao Gilberto. One of the best selling and best sounding albums of the 1960s.

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Frugality not only delivers great life satisfaction, it also delivers small victories whenever you score incredible values. So it’s been with my desktop stereo. I feel like I’ve paid for an economy seat and suddenly been upgraded to first class. I could go on about this, but it’s time to take another listen to the great Duke Ellington.

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Compare Your Employer-Sponsored Retirement Account Contributions to Others (Without Being Rude) http://www.frugalfringe.com/calculators/compare-your-401k-employer-sponsored-retirement-account-contributions-to-others-without-being-rude/ http://www.frugalfringe.com/calculators/compare-your-401k-employer-sponsored-retirement-account-contributions-to-others-without-being-rude/#comments Mon, 12 Jun 2017 09:30:12 +0000 http://www.frugalfringe.com/?p=6682

Curious about how your annual retirement deposits compare to other US taxpayers?

If so, you’ve come to the right place. Through the magic of governmental data you can see where you rank without making impolite inquiries to friends and coworkers.

This post covers employer-sponsored retirement accounts such as 401(k), 403(b), 457(b), 408(p) and Roth 401(k) plans. Individual Retirement Accounts (IRAs) involve different data sources and therefore will be covered in a separate post.

Statistics of Income Program

Each year, the Internal Revenue Service (IRS) collects random individual tax returns pursuant to its Statistics of Income (SOI) program. The SOI includes a review of W-2 forms known as the “Individuals, Form W-2 Tabulations Program.”  In the latest available W-2 program, which was conducted for tax year 2013, the IRS sampled 332,040 tax returns. See Statistics of Income—2013, Individual Tax Returns, Description of Sample at Table B.

Using W-2 data, the IRS reports annual employee contributions to various types of employer-sponsored retirement plans, including:

  • 401(k) Plans. This popular type of retirement plan is commonly offered by for-profit employers.
  • 403(b) Plans. Similar to 401(k) plans, but offered by qualifying nonprofit employers such as schools, hospitals, churches, and charities.
  • 457(b) Plans. Also similar to 401(k) plans, but offered by state and local governments to their employees or by non-governmental organizations to their top-level managers.
  • 408(p) Plans (also known as SIMPLE IRAs). This simplified version of a 401(k) plan is available to employers with fewer than 25 employees.
  • Roth 401(k) Plans. A less common type of 401(k) plan in which employees contribute after-tax dollars and make tax-free withdrawals.

Using IRS SOI data as expanded by a process of linear interpolation, this post presents percentile rankings for contributions made into the above-listed accounts. The percentiles appear in two formats: (1) as an online interactive calculator; and (2) as a six-column chart. All data is drawn from wage earners who actually contributed to retirement accounts in 2013. Those who didn’t contribute aren’t counted.

Retirement Contribution Ranking Calculator

To use the calculator, simply check the type of account you have, enter the amount of your contribution, and click the “Show Percentiles!” button. Not only will you see your percentile rank, you’ll also see a chart that compares the amount you entered to the mean contribution, the median contribution, the maximum contribution allowed for those under age 50, and the maximum contribution allowed for those age 50 or older.

As is the case with all my other calculators, any information you enter is completely confidential. Nothing you enter is recorded or stored.

Input Account Type:
401(k)
403(b)
457(b)
408(p)
Roth 401(k)

Input Annual Contribution:
$


Your retirement contribution ranking among all W-2 recipients for your type of account will appear in this space.

 

Retirement Contribution Ranking Table

To use the table, simply select the column that describes your type of retirement account and scroll down until you find the row that contains the amount that is closest to but not over the amount of your annual contribution. Your percentile ranking appears in the last column of that same row.

If your contribution is x dollars, then y percent of wage earners contributed a lesser amount:

401(k) 403(b) 457(b) 408(p) Roth 401(k) Percentile
$178 $205 $113 $215 $120 5
$214 $244 $138 $256 $141 6
$250 $283 $164 $297 $162 7
$286 $322 $189 $338 $183 8
$322 $361 $215 $379 $204 9
$358 $400 $240 $420 $225 10
$401 $439 $267 $452 $253 11
$444 $479 $295 $484 $282 12
$487 $518 $322 $516 $310 13
$530 $557 $349 $548 $338 14
$573 $596 $377 $580 $367 15
$616 $636 $404 $612 $395 16
$659 $675 $431 $644 $423 17
$702 $714 $459 $676 $452 18
$745 $753 $486 $708 $480 19
$788 $793 $513 $740 $508 20
$831 $832 $541 $772 $537 21
$874 $871 $568 $804 $565 22
$917 $910 $595 $836 $593 23
$960 $950 $623 $868 $622 24
$1,003 $989 $650 $900 $650 25
$1,063 $1,040 $696 $932 $693 26
$1,123 $1,091 $742 $965 $736 27
$1,184 $1,143 $788 $997 $780 28
$1,244 $1,194 $834 $1,030 $823 29
$1,304 $1,245 $880 $1,062 $866 30
$1,364 $1,296 $926 $1,094 $909 31
$1,425 $1,347 $973 $1,127 $952 32
$1,485 $1,399 $1,019 $1,159 $996 33
$1,545 $1,450 $1,065 $1,192 $1,039 34
$1,605 $1,501 $1,111 $1,224 $1,082 35
$1,666 $1,552 $1,157 $1,256 $1,125 36
$1,726 $1,603 $1,203 $1,289 $1,168 37
$1,786 $1,655 $1,249 $1,321 $1,212 38
$1,846 $1,706 $1,295 $1,354 $1,255 39
$1,907 $1,757 $1,341 $1,386 $1,298 40
$1,967 $1,808 $1,387 $1,418 $1,341 41
$2,027 $1,859 $1,433 $1,451 $1,384 42
$2,087 $1,911 $1,479 $1,483 $1,428 43
$2,148 $1,962 $1,526 $1,516 $1,471 44
$2,208 $2,013 $1,572 $1,548 $1,514 45
$2,268 $2,064 $1,618 $1,580 $1,557 46
$2,328 $2,115 $1,664 $1,613 $1,600 47
$2,389 $2,167 $1,710 $1,645 $1,644 48
$2,449 $2,218 $1,756 $1,678 $1,687 49
$2,509 $2,269 $1,802 $1,710 $1,730 50
$2,655 $2,388 $1,922 $1,814 $1,825 51
$2,801 $2,508 $2,042 $1,919 $1,920 52
$2,947 $2,627 $2,162 $2,023 $2,015 53
$3,093 $2,746 $2,282 $2,128 $2,110 54
$3,238 $2,866 $2,402 $2,232 $2,205 55
$3,384 $2,985 $2,522 $2,336 $2,300 56
$3,530 $3,104 $2,641 $2,441 $2,396 57
$3,676 $3,224 $2,761 $2,545 $2,491 58
$3,822 $3,343 $2,881 $2,650 $2,586 59
$3,968 $3,462 $3,001 $2,754 $2,681 60
$4,114 $3,582 $3,121 $2,858 $2,776 61
$4,260 $3,701 $3,241 $2,963 $2,871 62
$4,405 $3,820 $3,361 $3,067 $2,966 63
$4,551 $3,939 $3,481 $3,172 $3,061 64
$4,697 $4,059 $3,601 $3,276 $3,156 65
$4,843 $4,178 $3,721 $3,380 $3,251 66
$4,989 $4,297 $3,841 $3,485 $3,346 67
$5,135 $4,417 $3,961 $3,589 $3,441 68
$5,281 $4,536 $4,080 $3,694 $3,537 69
$5,427 $4,655 $4,200 $3,798 $3,632 70
$5,572 $4,775 $4,320 $3,902 $3,727 71
$5,718 $4,894 $4,440 $4,007 $3,822 72
$5,864 $5,013 $4,560 $4,111 $3,917 73
$6,010 $5,133 $4,680 $4,216 $4,012 74
$6,156 $5,252 $4,800 $4,320 $4,107 75
$6,707 $5,813 $5,335 $4,832 $4,405 76
$7,258 $6,373 $5,870 $5,344 $4,703 77
$7,809 $6,934 $6,405 $5,856 $5,002 78
$8,359 $7,494 $6,940 $6,368 $5,300 79
$8,910 $8,055 $7,475 $6,880 $5,598 80
$9,461 $8,615 $8,010 $7,392 $5,896 81
$10,012 $9,176 $8,545 $7,904 $6,194 82
$10,563 $9,736 $9,080 $8,416 $6,493 83
$11,114 $10,297 $9,615 $8,928 $6,791 84
$11,665 $10,857 $10,150 $9,440 $7,089 85
$12,216 $11,418 $10,685 $9,952 $7,387 86
$12,766 $11,978 $11,220 $10,464 $7,685 87
$13,317 $12,539 $11,755 $10,976 $7,984 88
$13,868 $13,099 $12,290 $11,488 $8,282 89
$14,419 $13,660 $12,825 $12,000 $8,580 90
$15,035 $14,538 $13,760 $12,400 $10,064 91
$15,651 $15,416 $14,695 $12,800 $11,548 92
$16,268 $16,293 $15,630 $13,200 $13,032 93
$16,884 $17,171 $16,565 $13,600 $14,516 94
$17,500 $18,049 $17,500 $14,000 $16,000 95
$18,875 $19,287 $18,875 $14,125 $17,750 96
$20,250 $20,525 $20,250 $14,250 $19,500 97
$21,625 $21,762 $21,625 $14,375 $21,250 98
$23,000 $23,000 $23,000 $14,500 $23,000 99

Source: IRS, Statistics of Income Division, Form W-2 study, January 2017.

A Note re: Using 2013 SOI Data in 2017

As of this writing, the IRS data you’re using is four years old. Is it still reliable in 2017?

The short answer is “yes.”

The chart below reports the SOI 401(k) plan results for tax years 2008-2013, plus an additional column for 2017, which duly reports the data is not yet available (“N/A”).

The chart shows that despite increases over time in the legal maximum allowable contribution (see “max” row) and extra allowable contributions for those 50 and older (see “catch-up” row), the reported “mean” average contributions have remained fairly level. So too have the reported contributions for the 5th through 90th percentiles. However, the 95th percentile figure has invariably increased to match the given year’s maximum allowable contribution (compare the “95th” row to the “max” row). Likewise, the 99th percentile has invariably increased to match the maximum allowable amount for those age 50 and older (compare the “99th” row to the “total” row).

Bottom line: the 2013 SOI data should be generally reliable for use in 2017 except that the 95th percentile amount will likely increase $500 to $18,000 and the 99th percentile amount will likely increase $500 to $24,000.

401(k) Plan Contributions: 2008-2013

2008 2009 2010 2011 2012 2013 2017
mean $4,501 $4,442 $4,558 $4,681 $4,772 $4,817 N/A
5th  $192 $167 $169 $184 $179 $178 N/A
10th $394 $341 $347 $365 $366 $358 N/A
25th $1,026 $953 $976 $1,004 $1,013 $1,003 N/A
50th $2,474 $2,397 $2,429 $2,465 $2,512 $2,509 N/A
75th $5,924 $5,649 $5,826 $6,000 $6,133 $6,156 N/A
90th $13,325 $12,951 $13,627 $14,180 $14,350 $14,419 N/A
95th $15,500 $16,500 $16,500 $16,500 $17,000 $17,500 N/A
99th $20,500 $22,000 $22,000 $22,000 $22,500 $23,000 N/A
max $15,500 $16,500 $16,500 $16,500 $17,000 $17,500 $18,000
catch-up $5,000 $5,500 $5,500 $5,500 $5,500 $5,500 $6,000
total $20,500 $22,000 $22,000 $22,000 $22,500 $23,000 $24,000

Source: IRS, Statistics of Income Division, Form W-2 study, January 2017.

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How to Compare Your Form W-2 Wages to Others by Age (Without Being Rude) http://www.frugalfringe.com/calculators/compare-your-form-w2-wages-to-others-by-age/ Mon, 05 Jun 2017 09:30:38 +0000 http://www.frugalfringe.com/?p=6598

Everyone likes to compare themselves to others—it’s basic human nature. But sizing up wages doesn’t make for polite conversation. In fact, it’s taboo. Faced with this, some people try to rank themselves indirectly, such as by trying to outspend their neighbors. This can produce great unhappiness (but at least it produces happy retailers).

If you could compare your wages to others without making impolite conversation or spending any money, would you do it?

If your answer is “yes,” then you’ve come to the right place. Through the magic of statistics, you can see how your Form W-2 wages stack up against everyone else—and best of all it’s free!

Statistics of Income Program

Each year, the Internal Revenue Service (IRS) collects random individual returns and places them into broad categories called “strata.” There are strata for different income ranges, age groups, and filing statuses (single, head of household, etc.). The IRS reports the resulting data in its Statistics of Income (SOI) program. The SOI analyzes W-2 forms in a review known as the “Individuals, Form W-2 Tabulations Program.” The latest available W-2 program uses tax returns for the year 2013 and draws from a sample size of 332,040 returns. See Statistics of Income—2013, Individual Tax Returns, Description of Sample at Table B.

This post reports W-2 wage percentiles in two different formats: (1) an online interactive calculator; and (2) a single table that shows how you stack up against all wage filers and different age groups. Both formats use the same reported SOI percentile figures as expanded by a process of linear interpolation. Because wages have remained stable in recent years, the most recent SOI W-2 data for 2013 should be reliable within a few percentile points as applied to your current earnings. However, if you seek a strict 2013-to-2013 data comparison, input your W-2 wages for 2013.

W-2 Wage Ranking Calculator

To use the calculator, simply enter your W-2 wages as reported on Box 1 of your Form W-2, select your age group from the drop-down menu, and click the “Show Percentiles!” button. As is the case with all calculators on this site, any information you enter is completely confidential. Nothing you enter is recorded  or stored.

My W-2 Wages:   $

My Current Age:  


∙ Your W-2 wage ranking among all W-2 recipients will appear in this space.

∙ Your W-2 wage ranking among all W-2 recipients in your age group will appear in this space.

W-2 Wage Ranking Table

Instructions: Using the first column, find whichever row reports the amount of W-2 wages that is closest to but not over the amount reported on Box 1 of your Form W-2.

To find out where you rank among all Form W-2 recipients, keep in the same row and look at the percentile reported in the next column to the right.

To find out where you rank among all Form W-2 recipients in your age group, keep in the same row and look at the percentile reported in whichever age-range column matches your current age.

W-2 All W-2s Under 26 26-34 35-44 45-54 55-59 60-64 65 & Over
Wages Percentile Percentile Percentile Percentile Percentile Percentile Percentile Percentile
$5,000 10.01% 24.56% 6.92% 5.45% 4.75% 5.29% 9.25% 21.71%
$10,000 18.92% 45.77% 14.32% 10.93% 9.80% 10.40% 16.18% 34.08%
$15,000 27.31% 61.49% 22.65% 16.79% 15.43% 16.24% 23.33% 45.48%
$20,000 35.45% 73.49% 31.69% 23.46% 22.06% 22.69% 30.15% 53.90%
$25,000 43.23% 82.27% 41.15% 30.33% 29.23% 29.94% 36.66% 60.63%
$30,000 50.44% 88.10% 50.46% 37.70% 36.22% 36.91% 43.46% 65.60%
$35,000 56.63% 91.22% 58.47% 44.59% 42.70% 43.63% 86.93% 69.80%
$40,000 62.82% 94.35% 66.48% 51.48% 49.18% 50.35% 56.27% 73.99%
$45,000 67.70% 95.83% 72.29% 57.40% 55.02% 55.96% 61.33% 77.07%
$50,000 72.58% 97.31% 78.11% 63.32% 60.87% 61.57% 66.40% 80.14%
$55,000 75.39% 97.74% 80.79% 67.00% 64.63% 65.24% 69.62% 82.00%
$60,000 78.20% 98.16% 83.47% 70.69% 68.39% 68.91% 72.85% 83.86%
$65,000 81.01% 98.59% 86.15% 74.38% 72.15% 72.59% 76.07% 85.72%
$70,000 83.81% 99.01% 88.84% 78.07% 75.90% 76.26% 79.29% 87.57%
$75,000 86.62% 99.44% 91.52% 81.76% 79.66% 79.93% 82.51% 89.43%
$80,000 87.86% 99.52% 92.47% 83.47% 81.45% 81.70% 84.01% 90.23%
$85,000 89.09% 99.61% 93.43% 85.19% 83.24% 83.46% 85.51% 91.02%
$90,000 90.33% 99.69% 94.38% 86.91% 85.02% 85.22% 87.01% 91.82%
$95,000 91.57% 99.78% 95.33% 88.62% 86.81% 86.98% 88.50% 92.62%
$100,000 92.80% 99.86% 96.29% 90.34% 88.60% 88.75% 90.00% 93.41%
$110,000 93.36% 99.87% 96.61% 91.10% 89.46% 89.61% 90.76% 93.88%
$120,000 93.92% 99.88% 96.94% 91.86% 90.32% 90.47% 91.51% 94.35%
$130,000 94.48% 99.90% 97.27% 92.62% 91.18% 91.33% 92.27% 94.82%
$140,000 95.04% 99.91% 97.59% 93.38% 92.04% 92.19% 93.02% 95.29%
$150,000 95.59% 99.92% 97.92% 94.14% 92.90% 93.05% 93.78% 95.75%
$160,000 96.15% 99.93% 98.24% 94.90% 93.75% 93.91% 94.53% 96.22%
$170,000 96.71% 99.95% 98.57% 95.66% 94.61% 94.77% 95.29% 96.69%
$180,000 97.27% 99.96% 98.90% 96.42% 95.47% 95.63% 96.04% 97.16%
$190,000 97.83% 99.97% 99.22% 97.18% 96.33% 96.49% 96.80% 97.63%
$200,000 98.39% 99.98% 99.55% 97.94% 97.19% 97.35% 97.55% 98.10%
$250,000 98.61% 99.98% 99.61% 98.23% 97.58% 97.70% 97.89% 98.35%
$300,000 98.83% 99.99% 99.68% 98.53% 97.97% 98.05% 98.23% 98.61%
$350,000 99.06% 99.99% 99.75% 98.82% 98.36% 98.41% 98.57% 98.86%
$400,000 99.28% 99.99% 99.82% 99.12% 98.75% 98.76% 98.90% 99.11%
$450,000 99.51% 99.99% 99.88% 99.41% 99.13% 99.11% 99.24% 99.37%
$500,000 99.73% 99.99% 99.95% 99.70% 99.52% 99.46% 99.58% 99.62%
$1,000,000 99.93% 99.99% 99.99% 99.93% 99.87% 99.85% 99.87% 99.88%
$1,500,000 99.96% 99.99% 99.99% 99.97% 99.93% 99.93% 99.94% 99.94%
$2,000,000 99.98% 99.99% 99.99% 99.98% 99.96% 99.95% 99.96% 99.96%
$5,000,000 99.99% 99.99% 99.99% 99.99% 99.99% 99.99% 99.99% 99.99%
$10,000,000 99.99% 99.99% 99.99% 99.99% 99.99% 99.99% 99.99% 99.99%

Source: IRS SOI Tax Stats—Individual Information Form W-2 Statistics, Wage Statistics Table 1.C

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Compare Your Charitable Giving to Other Contributors by Age and Income [2014 IRS Data] http://www.frugalfringe.com/calculators/compare-your-charitable-giving-to-other-contributors-by-age-and-income-2014-irs-data/ Mon, 29 May 2017 11:30:47 +0000 http://www.frugalfringe.com/?p=6551

When it comes to making gifts, US households are generous. The Giving USA Foundation estimates that in 2014 donations by individuals totaled $258.51 billion, which reflects a 7.1 percent jump from the amounts reported in 2013.

If you’re one of the kind souls who donate to charity, you might want to see how your household stacks up against others in the giving department.

Such a comparison can help you become a better philanthropist (to put it charitably).

For example, if you discover you’re lagging behind the average giving for your age or income, you might want to make catch-up contributions. On the other hand, if you find that your giving is above average, you might want to take extra care to document your donations because huge deductions tend to trigger IRS audits.

Statistics of Income Program

Each year, the IRS collects random tax returns and places them into broad categories called “strata.” There are strata for different income ranges, age groups, and filing statuses (single, married filing jointly, etc.). The IRS reports the resulting data in its Statistics of Income (SOI) program. The latest available SOI is for the year 2014 and reflects a massive sampling of 343,748 tax returns.

The SOI reports income as Adjusted Gross Income (AGI), which carries a particular meaning under the tax code. Basically, the AGI represents a taxpayer’s gross income from all sources minus certain defined reductions such as alimony payments and student loan interest. On Form 1040, the AGI appears on the last line of the first page.

Quandary: How to Present SOI Donation Data

In reporting charitable donations, the SOI draws solely from tax returns that contain itemized deductions. This makes sense. Non-itemizers don’t report donations so their tax forms don’t disclose anything about their level of charitable giving.

But even among itemizers, not everyone reports a deduction for gift making. Indeed, 17.61 percent of itemized returns in 2014 reported no charitable donations at all (7,744,054 out of 43,965,083 SOI returns, to be precise). See 2014 SOI, Table 2.1.

So here’s the quandary. I’m about to show you the average giving for various age and income groups. If I base those averages only on those filers who gave to charity, the resulting averages will be larger because they exclude noncontributing itemizers. If I instead use the data set of all itemizers—17.61 percent of whom reported zero contributions —the averages will be smaller.

My solution to this quandary is to provide you with two sets of results: (1) the average contributions of those itemizers who actually gave to charity; and (2) the average contributions of all who itemized, including the apparent skinflints who reported no gifts.

Instructions for the SOI Donation Tables

Table A presents average donations grouped in various ranges of AGIs. It’s easy to use.

  • Look up your AGI range in Column 1, then review the remaining columns for that specific row.
  • Column 2 reports the percentage of all itemizers in your AGI range who claimed a deduction for charitable giving.
  • Column 3 reports the average donations by those who actually gave something.
  • Column 4 reports the average donations by all itemizers including those who reported no contributions.
  • Column 5 reports the mean AGI for your AGI range.
  • Columns 6 and 7 report the average donation (columns 3-4) as a percentage of AGI (column 5) for: (a) actual givers (a higher percentage); and (b) all itemizers (a lower percentage).

Table B presents the same type of information as Table A, but is sorted by age groups instead of income ranges. Use it like you used Table A.

Table A: Average Donations by Adjusted Gross Income (AGI), Tax Year 2014

1 2 3 4 5 6 7
Size of AGI By Income Range Percent of Itemizers Who Give Average Donation:
Givers Only
Average Donation:
All Itemizers
Average AGI By Income Range Givers Donation:
% of AGI
Itemizers Donation:
% of AGI
All returns 82.39% $5,814 $4,790 $145,234 4.00% 3.30%
Under $5,000 53.92% $768 $414 $2,435 31.53% 17.00%
$5,000-$9,999 58.19% $1,479 $861 $7,752 19.08% 11.10%
$10,000-$14,999 62.02% $1,678 $1,040 $12,575 13.34% 8.27%
$15,000-$19,999 67.72% $2,041 $1,382 $17,545 11.63% 7.88%
$20,000-$24,999 70.98% $2,275 $1,615 $22,543 10.09% 7.16%
$25,000-$29,999 72.38% $2,568 $1,858 $27,486 9.34% 6.76%
$30,000-$34,999 71.30% $2,585 $1,843 $32,569 7.94% 5.66%
$35,000-$39,999 73.98% $2,359 $1,745 $37,540 6.28% 4.65%
$40,000-$44,999 74.99% $2,586 $1,939 $42,505 6.08% 4.56%
$45,000-$49,999 74.37% $2,837 $2,110 $47,508 5.97% 4.44%
$50,000-$54,999 77.98% $2,804 $2,187 $52,456 5.35% 4.17%
$55,000-$59,999 79.17% $2,904 $2,299 $57,441 5.06% 4.00%
$60,000-$74,999 80.14% $3,050 $2,444 $67,547 4.52% 3.62%
$75,000-$99,999 82.78% $3,356 $2,778 $87,208 3.85% 3.19%
$100K-$199,999 88.00% $4,130 $3,634 $137,655 3.00% 2.64%
$200K-$499,999 91.91% $7,424 $6,824 $286,143 2.59% 2.38%
$500K-$999,999 94.38% $18,615 $17,568 $672,705 2.77% 2.61%
$1M-$1,499,999 95.59% $38,621 $36,919 $1,204,736 3.21% 3.06%
$1.5M-$1,999,999 95.99% $56,412 $54,151 $1,717,687 3.28% 3.15%
$2M-$4,999,999 96.49% $107,840 $104,060 $2,994,666 3.60% 3.47%
$5M-$9,999,999 96.99% $286,779 $278,156 $6,854,681 4.18% 4.06%
$10M or more 97.93% $2,191,570 $2,146,203 $30,560,655 7.17% 7.02%

Source: 2014 SOI, Table 2.1

Table B: Average Donations by Age,Tax Year 2014

1 2 3 4 5 6 7
Age Group* Percent of Itemizers Who Give Average Donation:
Givers Only
Average Donation:
All Itemizers
Average AGI By Age Group Givers Donation:
% of AGI
Itemizers Donation:
% of AGI
All returns 82.39% $5,814 $4,790 $145,234 4.00% 3.30%
Under 18 16.61% $1,731 $287 $50,169 3.45% 0.57%
18-25 56.38% $2,184 $1,231 $54,453 4.01% 2.26%
26-34 68.40% $2,881 $1,971 $100,238 2.87% 1.97%
35-44 79.39% $4,152 $3,296 $143,848 2.89% 2.29%
45-54 83.55% $4,924 $4,114 $161,147 3.06% 2.55%
55-64 87.36% $6,434 $5,621 $160,176 4.02% 3.51%
65 & over 88.21% $9,086 $8,015 $141,741 6.41% 5.65%

*Age for joint returns is based on the primary taxpayer’s age.
Source: 2014 SOI, Table 2.6

Notes

1. All reported averages are mean averages (not median averages).

2. In both tables, Columns 3-4 reflect the total of both cash and noncash contributions. For the latest available IRS study of noncash contributions, which addresses tax year 2013, click here.

3. As reported in Columns 6-7 of Table A, lower-income groups appear to donate incredibly high percentages of their AGIs. A likely explanation: many taxpayers, especially retirees, have smallish AGIs but also enjoy high net worths that they generously share with charities.

*   *   *

The 2015 SOI will be released in late 2017. I’ll update the tables then. Meanwhile, if you’d like to explore other Frugal Fringe calculators, visit these links:

Photo by paukrus

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Calculator: the Future Value of an Annual Savings Stream http://www.frugalfringe.com/calculators/calculator-the-future-value-of-an-annual-savings-stream/ Mon, 24 Apr 2017 09:30:15 +0000 http://www.frugalfringe.com/?p=6440

This website promotes a basic truth: if you save now, you’ll prosper in the future.

But for this truth to change your life, it’s not enough just to read about it.

For frugality to change your life, you need to convince yourself of its powerful reality—and getting yourself convinced requires active investigation.

In order to convince you how much frugality can change your life I’ve prepared a new kind of interactive calculator:  FVAnnualSavingsCalc.

FVAnnualSavingsCalc lets you actively investigate how a greater level of frugality might affect your own finances. It works by answering this central question:

how much will you prosper when you permanently lower household spending and invest the resulting savings each and every year?

Household spending is a great source of savings. Why? Because lurking somewhere in the dark financial recesses of most households is a festering pool of hidden waste and inefficiency. When you learn the tricks to spot and correct these common flaws, your bills drop immediately—and, more importantly, the savings keep piling up for years to come.

It’s easy to understand that wealth will accumulate when you reduce spending, deposit the proceeds, and leave them untouched.

Everyone knows that.

But the burning question is this: how much will you earn if you make these changes now and how much time will it take for those savings to grow big enough to change your life?

That’s where FVAnnualSavingsCalc steps in.

FVAnnualSavingsCalc Instructions

To work the calculator, you only make three entries:

1. Your Annual Household Spending. A ballpark estimate works fine, but if you want more accuracy here’s a quick approach that produces an accurate annual spending figure in about an hour.

2. Percent Saved on Household Spending. The typical frugal newbie can expect to save about 20 percent per year. That’s how much is gained by cutting out waste and inefficiency. But by making even more aggressive cuts, it’s possible to slash annual living costs by 50 percent or more. You’ll be astounded by the amount of wealth that aggressive frugality creates. So let the calculator work its magic. Try inputting different percentages that reflect ever larger spending cuts and see how that affects the future value of your wealth.

3. Annual Rate of Return. This input predicts the rate your savings will grow each year. For a conservative estimate, enter five percent or less. If you’re interested in exploring the effects of higher rates, consider this: many financial planners project 8 percent as an average return for portfolios heavily invested in stocks.

FVAnnualSavingsCalc

1. Annual Household Spending: $
2. Spending Reduced By X Percent: %
3. Rate of Return on Investments: %


Years Accrued Compound Future
From Now Savings Interest Value
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Notes

1. FVAnnualSavingsCalc is designed to show the effects of making percentage cuts to your annual household spending. If you want to calculate cuts in terms of dollars instead of percentages, you can do so by making an easy adjustment. Just enter 100,000 into the first box of the calculator. Next, enter your desired savings stream stated as a percentage of $100,000. For example, to figure out the future value of $18,547.50 per year in savings, enter 100,000 into the first box and 18.5475 into the second box.

2. FVAnnualSavingsCalc assumes that you deposit your savings at the start of each year. The cumulative total of these deposits is reported in the column entitled: “Accrued Savings.”

3. The “Future Value” column reports the year-end future value (FV) of your annual payment stream (P) at the interest rate (ir) you inputted for however many years (n) you make deposits (up to 50 years). Here’s the formula:

FV = P * ((1 + ir)n – 1) / ir) * (1 + ir)

For example, if you deposit $10,000 on January 1 for 20 straight years at an interest rate of 5.5 percent, at the end of the final year your savings stream will have a future value of $367,860.76. Here’s how the formula works as shown by several simplifications:

$10,000 * ((1 + .055)20 – 1) / 0.055) * (1 + 0.055) =
$10,000 * ((1.9177574906) / 0.055) * (1.055) =
$10,000 * (34.86831801090909) * (1.055) =
$10,000 * 36.78607550150909 =
$367,860.76

4. Try moving your mouse over the blue dots on the chart. Cool animations will ensue.

*   *   *

If FVAnnualSavingsCalc motivates you to cut your household spending, then it’s served its purpose well.

To help you get started on the road to frugality, I’ve prepared more than 50 checklists that suggest cuts you can make to every line item of your household budget. The checklists are free to use. A good way to start using them is to review my easy-to-read introduction (which incidentally features my all-time favorite knock-knock joke).

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In Praise of Prius: After 7½ Years, We Still Count the Savings http://www.frugalfringe.com/case-studies/in-praise-of-prius-after-7%c2%bd-years-we-still-count-the-savings/ http://www.frugalfringe.com/case-studies/in-praise-of-prius-after-7%c2%bd-years-we-still-count-the-savings/#comments Mon, 17 Apr 2017 09:30:46 +0000 http://www.frugalfringe.com/?p=6249

On July 27, 2009, we bought a 2010 Toyota Prius III. The $28,670 gross price (with sales tax) was offset by: (1) a $4,500 payment from the federal “Cash for Clunkers” program; (2) a $2,880 Colorado tax credit for buying a hybrid vehicle; and (3) a $161.60 sales tax deduction on our Form 1040 Schedule A. With these offsets, our final net purchase price was a reasonable $21,128.40. Amount saved: $7,541.60.

We bought the Prius hoping that it would last at least ten years (as long as we avoided a major accident). Five years later, I posted this article about our cheap ownership costs—Halftime Report: Our 2010 Toyota Prius and the Benefits of Long Range Planning.

More than 2½ years have passed since I last reported on the Prius, so as our third quarter of ownership ends, it’s time to provide an update. Is our Prius still a big money-saver? Should you consider owning one yourself?

7½ Years of Prius Ownership Costs

Everything our household spends on vehicles is through credit cards, so it’s easy to track costs. This chart covers July 27, 2009 – January 27, 2017:

Year Depreciation Gas Insurance Reg & Tax Body Work Tires Repairs Oil
2009 $757.08 $431.88 $584.20 $593.23 $0.00 $0.00 $0.00 $0.00
2010 $1,816.99 $1,094.94 $421.74 $454.99 $0.00 $0.00 $0.00 $74.65
2011 $1,816.99 $1,230.88 $645.15 $368.01 $0.00 $320.18 $0.00 $100.06
2012 $1,816.99 $1,230.18 $650.40 $299.32 $0.00 $0.00 $0.00 $81.64
2013 $1,816.99 $838.31 $670.30 $207.34 $1,283.95 $493.89 $0.00 $66.65
2014 $1,816.99 $402.17 $599.95 $173.86 $0.00 $0.00 $0.00 $65.13
2015 $1,816.99 $769.64 $692.82 $174.00 $40.63 $0.00 $458.97 $54.95
2016 $1,816.99 $546.85 $810.04 $174.00 $0.00 $0.00 $75.00 $84.26
2017 $151.42 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
$13,627.40 $6,544.84 $5,074.60 $2,444.75 $1,324.58 $814.07 $533.97 $527.34

The bottom line: our operating costs during 7½ years of ownership have totaled $30,891.55, for an average of $343.24 per month. Here are the details.

Depreciation

Depreciation is what a vehicle loses in market value over time. To figure actual depreciation, I visited KBB.com in late January and entered the relevant data about our Prius including its mileage (112,837) and overall condition (very good, but not excellent). I then subtracted the car’s estimated market value ($7,501) from its original net purchase price ($21,128.40) to arrive at a figure for accumulated depreciation. I spread that amount evenly over 7½ years of ownership.

Gas

Mrs. Moose retired in August, 2012. This eliminated 16,000 commuting miles per year, but was partially offset by a welcome increase in vacationing miles. In late 2014, we moved from the mountains into town, which further reduced our annual mileage.

Registration and Tax

Newer vehicles trigger higher taxes, so during the first five years the Prius cost a bundle. But now the car is older. Starting in 2018, this line item will drop to $74 per year.

Body Work

In 2013, we suffered from my clumsiness. I had a small accident that cracked the front bumper cover, which is made of plastic. Why were the repairs so expensive? Answer: the new bumper cover had to be painted to match the rest of the car—and that involved big labor costs.

In 2015, the front passenger wheel well cover (also plastic) came loose at 70 MPH. It was promptly shredded by the fast-spinning tire. To avoid another body shop bill, I watched a YouTube video and did the work myself. Total cost: $40.63 for a replacement part from RockAuto.com.

Repairs

In 2015, we replaced the 12-volt accessory battery, transmission fluid, and air filter. Cost: $458.97. In 2016, we had a mechanic give the car a once-over before leaving for a 2,500 mile road trip. Cost: $75. Though 7½ years, this car has been a miracle of maintenance-free motoring. We’ve never even replaced the brake pads!

Oil

All oil changes have occurred as scheduled. The reported expenses may include occasional tire rotations and air filters.

Prius Costs vs. Average Sedan Costs

Since 1950, the American Automobile Association (AAA) has published the annual ownership costs for the average sedan. Using these reports, I’ve charted what the AAA’s typical sedan would have cost over the last 7½ years as compared to our actual expenses:

Year AAA Sedan Our Prius $ Saved
2009 $4,722.58 $2,366.39 $2,356.19
2010 $8,294.00 $3,863.30 $4,430.70
2011 $8,445.00 $4,481.27 $3,963.73
2012 $8,225.00 $4,078.52 $4,146.48
2013 $8,214.75 $5,377.43 $2,837.32
2014 $5,278.00 $3,058.10 $2,219.90
2015 $5,165.00 $4,008.00 $1,157.00
2016 $4,830.00 $3,507.14 $1,322.86
2017 $400.67 $151.42 $249.25
Totals: $53,575.00 $30,891.55 $22,683.45
Cost Per Year: $7,143.33 $4,118.87 $3,024.46
Cost Per Month: $595.28 $343.24 $252.04
Cost Per Day: $19.57 $11.28 $8.28
Cost Per Mile: $0.48 $0.27 $0.20
% Saved: 42.34%

According to the chart, we’ve spent 42.34 percent less than the AAA projections for savings of $22,683. But this overstates the benefits of owning a Prius because of two huge factors that had nothing to do with our particular car model: (1) we benefited from a scheme of governmental incentives; and (2) we paid cash and thereby avoided interest costs.

When I adjust for the incentives and avoided interest, is the Prius still a good value? The answer remains a resounding YES because we still save an impressive 25.53 percent versus the AAA’s average sedan:

Year AAA Sedan Our Prius $ Saved
Totals: $53,575.00 $39,897.65* $13,677.35
Cost Per Year: $7,143.33 $5,319.69 $1,823.65
Cost Per Month: $595.28 $443.31 $151.97
Cost Per Day: $19.57 $14.57 $5.00
Cost Per Mile: $0.48 $0.35 $0.12
% Saved: 25.53%

More Incentives to Keep Driving this Great Car

Apart from low operating costs, we have plenty of other reasons to hold on to our Prius:

1. Our New Big-City Sales Tax. When we bought the Prius in 2009 we lived in a county where the sales tax was 2.9 percent. Once we moved to town, the sales tax skyrocketed to 8.845 percent. On a $20,000 car purchase, this would mean paying $1,189 more in tax. The longer we delay this painful event, the better we’ll feel.

2. Ownership Taxes. Colorado charges lower ownership taxes for older vehicles. For 2017, the tax for our Prius is $103. In 2018, it will drop to $3 per year and remain at that low level forever. If we replaced our used Prius with a newer model, say one from 2015, our taxes would jump by about $750 over the next 2½ years.

3. Collision and Comprehensive Insurance. Now that the Prius is older—and worth a mere $7,500—we worry less about insuring it. We recently raised the deductibles for collision and comprehensive coverage from $1,000 to $2,500. If we upgraded to a newer model, we would return the deductibles to $1,000. This would cost an extra $1,200 in premiums over the next 2½ years.

4. If it Ain’t Broke, Don’t Replace It. We’ve had good luck with this car. If we updated to a used 2015 Prius, it would cost about $9,175 net after selling our current model in a private party transaction ($16,676 – $7,501 = $9,175). There’s no reason to pay $9,000+ for the dubious privilege of prematurely replacing the best car we’ve ever owned.

*   *   *

If our 7½ years worth of data doesn’t convince you, read these other sources that also endorse the Prius.

Bankrate.com has declared that the Prius is the cheapest car to own and operate. YourMechanic.com has concluded that the Prius is the cheapest model to maintain over ten years (at a mere cost of $4,300). The Prius has appeared repeatedly on lists of vehicles most likely to last 200,000 miles or more. Consumer Reports has tested a 2002 Prius driven 206,000 miles. After noting the car’s strong performance in acceleration and fuel economy, the reviewers were “amazed how much the car drove like the new one we tested 10 years ago.”

The evidence is clear: the Prius delivers a tremendous value in transportation. If both the car and I are still around 2½ years from now, I’ll post another data-intensive update that reviews a full decade of ownership.

* This figure adds the AAA’s projected five year finance charges of $3,895. It also adds the governmental incentives we received ($7,541.60) minus an adjustment for the lower price we would have negotiated had those incentives not created such a huge demand for hybrids in the first place ($2,430.50).

Great Prius Pic Joi Ito!

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Update: Adjusted Gross Income Ranking Calculators http://www.frugalfringe.com/calculators/update-adjusted-gross-income-ranking-calculators/ Mon, 10 Apr 2017 09:30:35 +0000 http://www.frugalfringe.com/?p=6194

Last week I reworked several posts that let you compare your Adjusted Gross Income (AGI) to IRS data. Although these posts have garnered more than 13,000 reader views, they’re a tad clunky because they present AGI percentiles in five lengthy charts. Using Javascript, I’ve modernized the presentation by adding interactive calculators (but the charts are still there if you prefer to use them).

Here’s a screenshot of an AGI calculator in action:

 

 

To use these new calculators yourself, click any of the following links:

Photo by digital cat

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6194
Latest Calculator Updates! http://www.frugalfringe.com/calculators/latest-calculator-updates/ http://www.frugalfringe.com/calculators/latest-calculator-updates/#comments Mon, 03 Apr 2017 09:30:34 +0000 http://www.frugalfringe.com/?p=6105

I spent most of this past week in the land of Javascript. After much fiddling with code, I’ve rolled out major additions to two popular Frugal Fringe calculators.

New Printable Table for Labor Cost Calculator (LCC)

At this writing, the LCC is closing in on 20,000 reader views. It’s been featured on Lifehacker, Travel+Leisure, Mental Floss, Rockstar Finance, Business Insider, and many other websites. The LCC takes any upcoming purchase you might have and shows how many working hours you’ll swap for it based on your salary, state and federal tax brackets, and hours spent at work and on commutes.

Using the magic of Javascript, I’ve added a new printable chart that shows how much of your life you trade away at various spending levels—all the way from $1 to $100,000. Here’s a screenshot based on someone who earns about $77,000 per year:

To create and print your own LCC chart, click here.

New Interactive Calculator for Census Bureau Income Tables

At this writing, this site’s income percentile tables have received more than 50,000 views. The income tables allow you to compare your annual household or individual income with actual Census Bureau data from the years 2013 – 2015. Using Javascript, I’ve added an online interactive calculator that delivers your results much faster than tables can (although the tables will still be there if you prefer that approach). Here’s a screenshot:

To test drive the new income ranking calculators yourself, click any of these links: 2013 Census data, 2014 Census data, and 2015 Census data.

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Worthometer Updated to Include Interactive Calculator http://www.frugalfringe.com/worthometer/worthometer-updated-to-include-interactive-calculator/ http://www.frugalfringe.com/worthometer/worthometer-updated-to-include-interactive-calculator/#comments Mon, 27 Mar 2017 09:30:34 +0000 http://www.frugalfringe.com/?p=5971

As part of this website’s ongoing remodel, I’ve updated the popular Worthometer, which at this writing has garnered more than 35,000 views.

Users will now have the option to look up their household net worth ranking on either: (1) a two-column table; or (2) a brand new interactive calculator.

Here’s a screenshot:

To try this new feature yourself, click here.

*      *      *

This latest revision reflects my continuing forays into the magical world of Javascript and its rich landscape of arrays, functions, and methods. I hope to provide further updates in the coming weeks.

Photo Credit: Hollerith Census Machine by Marcin Wichary. To see original at Flickr, click here.

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2017 Obamacare Premium Tax Credit Calculator Version 2.0 http://www.frugalfringe.com/calculators/2017-obamacare-premium-tax-credit-calculator-version-2-0/ Mon, 20 Mar 2017 09:30:41 +0000 http://www.frugalfringe.com/?p=5287

This year the federal government once again offers a Premium Tax Credit (PTC) to qualifying taxpayers who buy health coverage from an approved health insurance exchange.

To receive a PTC you must split the uprights between making too little and too much income. If you make too little, you drop out of Obamacare and into Medicaid. This precludes any PTC and subjects you to coverage that many believe is inferior to private health insurance. The PTC also disappears if you make too much. This happens when your household income exceeds 400% of the applicable poverty line (the government draws this line based upon your state of residence and household size).

Calculator Instructions

To assist your Obamacare planning for 2017, I’ve reformatted this site’s popular PTC Calculator into an interactive online experience (for the earlier version, click here). The calculator shows how much of your monthly premium will be reimbursed by the government and how much, if any, you’ll have pay yourself. And yes, the output even includes a helpful pie chart. 🙂

To see your bottom line, enter your state of residence, the number of people in your household, and these three numbers:

Line 3: Your Monthly Premium. Plug in your monthly cost of health insurance for 2017. This is the premium you contracted to pay during the open enrollment period that began November 1, 2016 and ended January 31, 2017.

Line 4: The Monthly Premium of the Second Cheapest Silver Plan You’re Offered. Known as the Applicable Benchmark Plan (ABP), see Internal Revenue Code § 36B(b)(2), this amount can be obtained by ranking from cheapest to most expensive all the Silver plans that the health insurance exchange offered to you during the open enrollment period. The ABP is the second cheapest silver plan you were offered. You can also obtain the ABP by calling the marketplace from which you purchased your insurance. Your ABP can vary widely from year to year. For example, for 2014, our household’s ABP was $730.73, for 2015 it was $637.80, and for 2016 it was $886.85. For 2017 it will be a whopping $1,043.39.

Line 5: Your Projected 2017 Modified Adjusted Gross Income (MAGI). For most taxpayers, there exists no difference between Adjusted Gross Income (AGI) and MAGI, because most households don’t experience any of the three narrow circumstances that trigger MAGI calculations: non-taxable social security benefits (see Form 1040, lines 20(a)-20(b)), tax-exempt interest (see Form 1040, line 8b), and excluded foreign earned income and housing expenses for those who live abroad (see Form 2555, lines 45 and 50). If your income stays level year-to-year, you can enter the AGI as reported on your most recent federal tax return (Form 1040, line 37). If your income fluctuates year-to-year, enter low and high estimates for 2017 to see how they affect the results.

Here’s the calculator. If the pie chart below appears as a solid red ball, this means that the PTC will cover 100 percent of your monthly health insurance bill—a very good result indeed.

2017 PTC Calculator

1 Enter Your State of Residence
2 Enter the Number of Persons in Your Family
3 Enter Your Monthly Premium
4 Enter Monthly Premium of Second Cheapest Silver Plan Offered to You
5 Enter Your Projected Modified Gross Income (MAGI) for 2017


6 Your Household's Poverty Line
7 Federal Poverty Line Percentage (FPLP) [Line 5 / Line 6]
8 FPLP Rounded to a Whole Number [Line 7 Rounded]
9 Applicable Percentage [From 2016 Form 8962 Instructions, Table 2]
10 Amount to be Subtracted from Line 4 [(Line 5 * Line 9 )/ 12]
11 Monthly Premium Tax Credit [Line 4 - Line 10; or 0 if Line 10 = 0]
12 Monthly Net Cost of Premiums [Line 3 - Line 11]

Note: values for the Applicable Percentage figure as reported on line 9 are based upon the expected premium contribution levels as listed in the 2016 version of the Form 8962 Instructions. The IRS won't release the 2017 Form 8962 instructions until late 2017.

Tax Planning Notes

Defer or Accelerate Income. The calculator can tell you how much your PTC might change if you accelerate extra income into 2017 or, alternatively, defer receiving it until 2018. For example, if accumulated gains on stocks you now hold would push you over 400% of the Poverty Line (line 8), you might delay selling them until after January 1, 2018 (but of course this strategy exposes you to the risk of any intervening market downturns).

Defer or Accelerate Adjustments to Income. The PTC Calculator might also show that you could benefit by making adjustments to income in 2017, or, alternatively, by deferring them into 2018. Such adjustments include paying student loan installments early, funding Health Savings Accounts, accelerating 2018 tuition payments into 2017, and more. For a full list of possible adjustments, review lines 23 - 35 of Form 1040.

Avoid Medicaid. You can also use the PTC Calculator to avoid Medicaid coverage (if indeed this is something you wish to avoid). Medicaid eligibility is based upon your family's Federal Poverty Line Percentage (FPLP) (see line 8 of the PTC Calculator). Whether you're subject to Medicaid is a complex question because states apply differing FPLPs based upon existing pregnancies or the number of children in the household. A fast starting point for analysis is the Medicaid eligibility chart published by the Centers for Medicare and Medicaid Services (click here). Several cautions apply to using this chart. First, it contains information current as of June 1, 2016. Rules change frequently so check for any updates at your home state's Medicaid website. Second, Medicaid eligibility can vary based upon citizenship, residency, or immigration status. If any of your household members have issues in these areas, consult an expert. Third, all states disregard 5% of FPLP when calculating eligibility. So, for example, if the eligibility chart reports your household's FPLP threshold as 133% for Medicaid, to be on the safe side boost your MAGI until you reach an FPLP of at least 138% (as reported on line 8 of the calculator).

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The tax code is a dense labyrinth filled with many traps for the unwary—and this is especially true when it comes to the complex rules that govern Obamacare. The PTC Calculator will point you in the right direction, but confirm what it tells you by consulting a competent tax advisor who knows your circumstances.

If you'd like to explore my other articles about Obamacare, click these links:

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