Why does a $1000 increase in rental income cause my taxes to go up $308, more than the 25% tax rate that I am in?

[vauciello]

Why does a $1000 increase in rental income cause my taxes to go up $308, more than the 25% tax rate that I am in?

[TaxGuyBill · Accepted solution]

The 'extra' income can affect many other things on your tax return.  It can decrease some credits and deductions, make more Social Security taxable, be subject to the 3.8% Net Investment Income tax, be subject to AMT, and more.

If you really want to know what is happening, print out your tax return with the $1000 increase, and then again without the $1000 increase.  Then look at which lines on the Form 1040 change.