Hi Wendy,
Thanks. I'm assuming your answer isn't simply "the more you make the more you are taxed" which I think everyone knows. So, I'm just verifying that the question was understood. We are filing MFS. We live in a community property state so we must split all income 50/50.
So, my return and my wife's return have the same Net income, the same "taxable income". We have a few income sources. Not just W2 income. We each have an equal share in a partnership (K-1 income). It's equal so we each earn the same amount from this partnership.
We also get the Foreign earned income deduction on our W2 income so that complicates things a bit, but in the end, the amount on line 15 (taxable income) on each of our 1040's is the same.
The only real difference is that the W2 portion of my income is 2X the W2 portion of my wife's income.
We do not have federal withholding on our paychecks. We pay quarterly tax estimates. I'm just trying to figure out if W2 income is taxed first, or differently than other income sources when the IRS is figuring the tax rate/effective tax rate. Because looking at tables it would seem that all income is lumped together and then you get taxed at whatever bracket you income falls into.
But if that were the case, then my effective tax rate should be the same as my wife's since we have the same net "taxable income". But that is not what Turbo is showing us, so there must be some details in the tax code about "types" of income, etc. And our W2's are the only thing different between us so....
So, would the difference in effective tax rate boil down to FICA taxes on the W2's? Or something else specific to the W2's?
Thanks!
