getting bumped up in taxes 2013

[mizzou]

Anyone ever been hit with a substantial tax increase (like going from .15% to .25% taxes) by barely going over the tax ceiling for your % group?

I should still be in the .15% group this year with a significant cushion, but holy crap, what if you just BARELY got pushed into the .25% group, then that little raise would end up costing you $$$$ big lol.

How the fuck is that fair?

 

[ichy]

:facepalm:

Learn how marginal tax rates work, then come back and delete this post in embarrassment.

 

[Vic Vega]

Have a 401K? Up your contribution to put yourself back under if you are just slightly over.

Simple really, you can keep your money or Uncle Sam can take it.

 

[mizzou]

:facepalm:

Learn how marginal tax rates work, then come back and delete this post in embarrassment.

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

 

[DaveSimmons]

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

The 25% only applies to the part of your income above $34,500. The "marginal" amount.

The first $34,500 is always taxed at 15%, even if you make $100,000.

 

[dank69]

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

Using your table you only get taxed 25% on the money over $34,500. The first 34,500 is still taxed at 15%

 

[Pantoot]

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

No. If your taxable income was 34,600 you would pay:
15% on 34,500-8,500
25% on $100 (the amount over 34,500)

 

[jagec]

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

OK, first off, if I only paid 0.25% taxes I would be jumping up and down with joy. But let's compare your scenarios. Let's assume that there are no deductions, exemptions etc.

The guy making $34,500 pays 15%, or $5,175 in taxes.
The guy making $34,600 pays 15% on the first part, or $5,175, and 25% on the next hundred dollars above 24,500, or $25.

Grand totals:
$5,175 for the guy in the 15% bracket,
$5,200 for the guy in the 25% bracket. But the second guy gets to moan a little bit louder about how much the government is screwing him, even though it's not true.

 

[IronWing]

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

If you made $34400 you would pay $3885.
If you made $34500 you would pay $3900.
If you made $34600 you would pay $3925.

Edit: jagec, the first $8500 is tax free.

 

[Born2bwire]

I was just looking at this (single filing)
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus

I would imagine if your taxable income is $34,600 you would now be .25% bracket vs .15% bracket? Wouldn't that make a significant difference in your effective tax rate?

I'm no tax pro here

*Sigh*

They still tax the first $34,500 of your income at 15%, then they tax the income OVER that by 25%. Hence, if you made $34,600, then you would be taxed:

0.15*$34,500 + 0.25*$100 = $5,200

You still take home more money and the amount of money that you used to earn that when you were in the lower bracket is still going to be taxed the same way as before.

EDIT: Damn, we all jumped on this one.

 

[Schfifty Five]

Anyone who has to file a tax return should learn at least how tax brackets/marginal tax rates work. Hell, every adult should learn this.

 

[D1gger]

Wow. How does anyone who has ever filed a tax return not know how the marginal tax rates work?

 

[DaveSimmons]

It's always sad to see people passing on the urban legend about "a friend" who got a small pay increase and ended up with less money because he "moved into a higher tax bracket."

As we all explain in the posts above, it does not work that way. Only the new, extra money is taxed at a higher rate. The old, existing money is still taxed at the lower rate.

By the way, if you itemize then your donation to Child's Play could lower your tax bill. Free monies!

 

[IronWing]

Wow. How does anyone who has ever filed a tax return not know how the marginal tax rates work?

"I just know H&R Block gets me money back."

- said by a coworker who paid H&R Block to fill out the EZ form.

 

[Schfifty Five]

Have a 401K? Up your contribution to put yourself back under if you are just slightly over.

Simple really, you can keep your money or Uncle Sam can take it.

Uncle Sam will take part of it eventually.

 

[NikolaeVarius]

Wow. How does anyone who has ever filed a tax return not know how the marginal tax rates work?

I don't know, I filed my first return age 18 and I knew how margnial rates worked.

 

[mizzou]

LOL that definitly cleared it up then didn't it!

 

[DaveSimmons]

Uncle Sam will take part of it eventually.

Yes, but odds are at retirement you'll be making less. Plus if you get employer matching that's more free money.

And, for those still confused about marginal tax rates, putting money into a 401k will "move you into a lower tax bracket"

 

[Schfifty Five]

I predict the next trolling subject for ATOT will be more threads like this.

Someone will create one saying "OMG, I got a raise but I'm going to end up with less money after taxes >< "

 

[Schfifty Five]

I don't know, I filed my first return age 18 and I knew how margnial rates worked.

You are an exception to the norm! :thumbsup:

 

[edro]

Holy crap. I am embarrassed that I didn't know about this.
I am suddenly having a huge moment of clarity. Some many things makes sense now.
If this topic ever comes up in real life, I will act like I knew it all my life.

 

[kranky]

"I just know H&R Block gets me money back."

- said by a coworker who paid H&R Block to fill out the EZ form.

I know some people like that.

I once had some coworkers who had so little understanding of the income tax system they believed the person with the bigger refund was obviously smarter about taxes.

"I got $2,000 back!"
"Oh, man, you gotta show me how you did that."

Like it was some magic trick or something.

Really, due to tax withholding, so many people have no clue what is going on with their individual tax situation. They don't know what they are actually paying, they don't know how to manage withholding, they only know how to ask "Am I getting a refund?" It's why people do pay H&R Block to do an EZ form.

I used to charge $5 to do an EZ form for other students when I was in college but I wouldn't do it in front of anyone. Everyone was happy to pay $5 when it was done, but I knew there would be trouble if they saw it literally took me 2 minutes to fill out. Then that small fee would seem like highway robbery.

 

[jagec]

If you made $34400 you would pay $3885.
If you made $34500 you would pay $3900.
If you made $34600 you would pay $3925.

Edit: jagec, the first $8500 is tax free.

I was giving a marginal tax example, not a US tax system example...that's why I said no deductions/exemptions. You're right, of course, but that number varies from year to year and person to person.

 

[edro]

It's good to go to a tax professional at least once, so you can see the standard deductions you can take.
We met with one last year and saved a lot more.
Tons of home office and work related deductions, we were paying a local income tax that we weren't required to (we lived outside city limits), etc.

 

[Ausm]

Anyone ever been hit with a substantial tax increase (like going from .15% to .25% taxes) by barely going over the tax ceiling for your % group?

I should still be in the .15% group this year with a significant cushion, but holy crap, what if you just BARELY got pushed into the .25% group, then that little raise would end up costing you $$$$ big lol.

How the fuck is that fair?

.15%? I wish I was in the .25% group.