Median income, a false statement perhaps

I think that the statement that one is above or below the median income, can be a very deceiving way to view things. It is one measure – no doubt a good comparison like the traditional thought of tax paid versus tax bracket that one is in.
The reason that I believe it is a false statement is simply the fact that there are several items that can come out before being marked as income.

As an example, I’ll provide this snapshot of a spreadsheet that was easy to throw together to simplify and clarify.

Gross Income Vs Median Income

Gross Income Vs Median Income

If you look at the table above, you’ll notice that if a person or couple can use available pre-tax “benefits” such as the 401k, 403b, IRA, Medical plan payments, HSA (health savings account) payments, etc., than they can significantly reduce the amount of income that they are taxed on. I specifically chose the values seen to point out how easy it is to use the tax system to your own advantage.

If you would like, the spreadsheet is available here at no cost, and you can use it to substitute the specific values you would like. Just leave a comment, or send me an email to admin@richintheheart.com.

This entry was posted in budget, economics, Income Tax and tagged , , . Bookmark the permalink.

One Response to Median income, a false statement perhaps

  1. a. nonymous says:

    I’d like to see more articles and maybe even a free app or two if you get some time.
    Gracias 4 what you penned already!

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