You're trying to decide if you can afford to have your spouse stay at home with your baby. An important part of that decision is to determine how much taxes you will pay on your $85,000 salary.

To start off, you'll owe 7.65% of your income for social security and Medicare taxes. You will also owe 5% of your income to Massachusetts, since that's the state where you work. You might owe RI some taxes if their taxes on $85k of income exceed the taxes you pay to Mass. In that case, you'll pay the difference to RI.

For federal taxes, your child gets you a $1,000 tax credit, provided your joint income is less than $110,000 this year. Remember, a credit is a dollar for dollar reduction in your tax liability - so it means $1,000 in your pocket. You'll also be entitled to a deduction for an additional personal exemption of $3,200 (I think)this year. Assuming you're at the 25% tax bracket, that will save you another $800 in taxes.

Will claiming 2 allowances do the trick? I can't tell you that, since it depends on whether you own a home, and what else you have going on with your
taxes. But if you earn $85,000, and your spouse doesn't work, you might be able to claim more than 2 allowances, and still not owe any additional taxes
next April. The only way to know for sure is to work through a tax projection, and then compare your projected tax liability with the rate that taxes are being withheld from your pay check.

Zip Code: cpa@mdtaxes.com