Tax planning for 2021. How you can end up paying 110% tax rate

Tax planning is extremely important for 2021. I know this will not apply to many on this forum but it might apply to your friends and family.

In 2020 I filed MFS and we were $1,500 better off. We are a 2 working household that were phased out of the stimulus bills. By filing MFS, my taxes went up some but were more than offset by the recapture of some of the prior stimulus bills. As such we were $1,500 better off on our 2020 taxes.

Looking forward to 2021, we are making additional changes in our household tax strategy. We want to minimize her income. Her AGI is going to be critical for 2021. We are maxing out her shitty 401k plan and will evaluate whether she will need to take unpaid days off of work in 2021. If her AGI is less than $75,000, she can recapture the stimulus plus take advantage of the boosted child tax credit. The phase out of the child tax credit is $80,000 and the stimulus $90,000 (tail of phase out is longer than $80K due to two kids). What is at stake is $7,400 ($1,400 x 3 stimulus + 1,600 x 2 boosted child tax credit). So the effective phase out in this window is $1.10 for every dollar of AGI between $75,000 to $80,000. Effectively for her AGI in the $75,000-$80,000 window is taxed at 110%. For any MFJ filers this will also apply for AJI in the $150,000-$160,000 income levels.