Lower Your Adjusted Gross Income

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Lowering your adjusted gross income (AGI) can save you a lot of money. The most obvious way it saves you money is by lowering your taxable income, thus lowering the amount of tax you have to pay.  Having a lower AGI also saves me money since it increases the amount of my premium tax credit making my health insurance bill less. Since my student loan is on income-based repayment a lower AGI also reduces the amount of my monthly student loan payment. For higher income earners lowering their AGI can allow them to be able to contribute to a Roth IRA. Also, many itemized deductions are tied to your AGI. For instance, medical expenses are deductible to the extent that they exceed 10% of your AGI.

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There are several ways to lower your AGI. To find different ways to reduce your AGI all you need to do is look at the Adjusted Gross Income section at the bottom of the front page of Form 1040.  It is unlikely you will qualify for all of the different ways to reduce your AGI but you most likely qualify for a few of them. For 2014 I managed to reduce my AGI from $30,000 to $20,000.  I did this by maxing out my traditional IRA, contributing $2200 to my health savings account, getting a student loan interest deduction, getting a self-employment tax deduction, and the self-employed health insurance deduction. Moving expenses, educator expenses, and the tuition and fees deduction are some of the other common ways to lower AGI.

Contributing to a 401k is another great way to lower your AGI. The 401k doesn’t show up on the Form 1040 because these contributions go straight to the 401k account and aren’t included in taxable income or reported on the 1040. Unfortunately, I don’t have access to an employer 401k plan since my employment is seasonal or temporary. I’m considering opening a solo 401k, but I’m not sure I will have enough money to contribute to make it worth opening an account.

Although I managed to reduce my AGI by almost a third last year I could have done even better. If I would have maxed out my HSA, paid more on my student loans, and opened and contributed to solo 401k it is possible I could have reduced my federal income tax to zero.  Of course, you do need some money to live on and all of these ways to lower your AGI reduce your spendable income so there is a limit to how low you can go on your AGI.

Has anyone else managed to lower their AGI by a large percentage? If you have any other suggestions for lowering AGI I would love to hear them.

Easy Money from Staples Gift Card Deal

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Until 3-21-15 Staples is offering a $20 rebate in the form of a Visa gift card when you buy $250 or more of Visa gift cards. The purchase fee for a $200 gift card is $6.95. If you buy 2 $200 gift cards you will have a profit of $6.10. That doesn’t sound like much but when  you combine it with the credit card rewards you can get for purchasing the cards it is a good deal. I know at least one of my readers has a Chase Ink card that pays 5x at Staples which would mean they would get 2000 Chase Ultimate Rewards points in addition to the $6.10. I only have a 2% cash back card so my profit will be $14.10. That is a pretty good deal for just a few minutes of my time to buy the cards and submit the rebate.  In addition to making a little money this is also helpful if you need to meet a minimum spend requirement to get a credit card bonus. There is a limit of one rebate per household for this deal.

Next week, 3-22-15 to 3-28-15, Staples is offering a $20 rebate in the form of a Staples gift card when you buy $250 or more of Mastercard gift cards. The math for this deal works the same.  The big difference in this deal is that the rebate is for a Staples gift card which can only be used at Staples rather than for a Visa gift card which can be used anywhere that accepts Visa. This isn’t a big deal to me since I buy stuff at Staples on a regular basis.  I’m in Staples at least once a month to get free stuff from recycling ink and they frequently have free after rebate items so using the Staples gift card will not be a problem.

February FIRE Numbers – 33.20 Months of Expenses Saved

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My February FIRE (financial independence retire early) numbers were down slightly from the month before. This was disappointing since this is the time of year I am supposed to make the best progress on my numbers. Part of the reason for the poor performance was that I didn’t get some money moved from checking to savings. That money will get moved this month which will make this month look better.

My safe withdrawal rate declined slightly from 35.89% in January to 36.13% in February. Either way it is a long way to my goal of 4%.

I have 33.20 months of expenses saved which is slightly less than the 33.43 months of expenses I had saved in January. My goal is to have 300 months of expenses saved.

March should be a much better month financially and I expect to see significant improvement in both of these numbers.

February Expenses – $946.17

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Here is a breakdown of my expenses for February.

Household $429.55
Entertainment $79.30
Transportation $58.02
Food $100.77
Student Loan $106.00
Travel $0
Phone $26.81
Health $145.72
Total $946.17

 

My February expenses were fairly low. I managed to make my stretch goal of keeping my expenses under $1000 a month for the third month in a row.  The streak will end when I have to pay for my dental implants. I’m hoping I can keep the streak going until them.

My food expenses were low since I managed to keep my fast food expenses under $50.  There are also some dinners out with my GF that I put in the entertainment category. Those were kept fairly cheap with coupons and/or gift cards. I did pretty well in that category considering Valentine’s Day and my GF’s birthday were in February.

My health expenses were a little higher due to getting sick and needing some prescriptions. The total would have been much lower if I hadn’t paid $53 at CVS for a drug I could have gotten for $4 at Walmart. I won’t be filling any more prescriptions at CVS. I can’t complain about the overall cost of the sickness. My GF being a nurse managed to get me a couple prescriptions from her nurse practitioner and doctor without having an official doctor visit. I will have to pay some lab fees this month, but they won’t be too much.

March should be another low-cost month. We do have a vacation to Las Vegas coming up at the end of the month. The airfare was free and the room is free other than the resort fee so the vacation shouldn’t cost too much.

February Income – $2161.46

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Here is a breakdown of my income for February.

Online Income

 $243.82
Interest

$14.53

Cash Back

$12.35
Amazon FBA $0
Jobs $1890.76

Total

$2161.46

 

February was a decent month for income, but not as good as I hoped. Missing three days of work due to being sick resulted in my job income being a good deal less than I planned. Online income went down by quite a bit. This wasn’t a surprise since it was unusually high the month before.  I didn’t manage to make any money from bonuses or Amazon FBA. I actually lost a little on FBA which I will take off this month’s total.  My interest income went up a little since I loaned my GF $10,000 to buy a car. I might write more about that later.

The job income should go up this month and hopefully I will be able to make a little more money from my alternative income streams. I’m hoping to not work at a job the rest of this year once I finish my tax job so I need to bump up this income.

 

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