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Level 2

Confused on where the blended tax rate of 16.4% is coming from when I should be at a 12% for 2018.

 
2 Replies
Level 20

Confused on where the blended tax rate of 16.4% is coming from when I should be at a 12% for 2018.

Different sources of income are taxed at different rates. For example (one of many) if you sell rental property the recaptured depreciation is taxed at a minimum of 15% and a maximum of 25% regardless of what tax bracket you may fall in to.

Likewise, your earned income (reported on W-2) is taxed incrementally. For example, for a person filing single the first $9,525 is taxed at 10%. Then from $9,526 to $38,700 is taxed at 12%. Then from $38,701 to $82,500 is taxed at 22%.

So if you earned $60K on a W-2 for the entire tax year, the taxes on that will be $9,139 and the "blended" tax rate will be 15.2%

Level 2

Confused on where the blended tax rate of 16.4% is coming from when I should be at a 12% for 2018.

Thank you so much for your response Carl! How does this work out if I haven’t sold any type of properties. My income also isn’t above 38k so I’m really just confused all around.