No. The tax system is a graduated system which means the rate increases at incremental levels. First it starts with taxable income, so your "gross" amount may not be reflective of your taxable income. Gross income reduced for any adjustments, exemptions and deductions equal the taxable income. If I used your example with the basic standard deduction and four exemptions your taxable income is $123,171.$151,971 - $12,600 (standard deduction) - $16,200 (4 exemptions) = $123,171Of the taxable amount in this example $47,871 is in the 25% bracket. Until and unless your income is reduced by this amount part of the taxable income will remain in the 25% bracket. As you can see for each $100 you reduce your taxable income you keep $25.If you use your actual figures such as itemized deductions your taxable income will be much lower than our example. The next drop in rate to 15% begins when the taxable income is below $75,300.

TurboTax

File with experts
File your taxes
Experts at your fingertips

An expert helps with your taxes, or does them for you
TurboTax Expert Full Service

TurboTax Expert Assist

TurboTax Self-Employed
Prior year taxes
File myself
File myself
Do it yourself

We'll guide you step-by-step
TurboTax Do It Yourself

TurboTax Self-Employed

TurboTax Desktop
TurboTax Free

Activate your product

Prior year taxes
Business
Business
Business taxes

Get your T2 corporate return done right, your way
TurboTax Business

TurboTax Business Desktop
Tax situations
Tax situations
Tax situations

Find extra guidance for your big life moves
For investors

For 25 and younger

For self-employed

For new to Canada

For life changes
Resources
Resources
Resources

Explore tax tools, get tips, and read reviews
Personal income tax calculator

RRSP savings calculator

Learning hub

TurboTax support (FAQ)

TurboTax community
Pricing

mamasboypowerspo

Level 1

Solved

We are a married couple with 2 kids....We made $151,971 gross in 2016...This is $71 over 25% tax bracket and bumps us into the 28% bracket. Will a $100 401k contribution bump us back down to 25% bracket and save us thousands of dollars ?

Forum|Forum|7 years ago
June 1, 2019
1 reply
9 views

No text available

TurboTax Deluxe Online

Best answer by DianeW777

No. The tax system is a graduated system which means the rate increases at incremental levels. First it starts with taxable income, so your "gross" amount may not be reflective of your taxable income. Gross income reduced for any adjustments, exemptions and deductions equal the taxable income.

If I used your example with the basic standard deduction and four exemptions your taxable income is $123,171.

$151,971 - $12,600 (standard deduction) - $16,200 (4 exemptions) = $123,171

Of the taxable amount in this example $47,871 is in the 25% bracket. Until and unless your income is reduced by this amount part of the taxable income will remain in the 25% bracket.
As you can see for each $100 you reduce your taxable income you keep $25.

If you use your actual figures such as itemized deductions your taxable income will be much lower than our example. The next drop in rate to 15% begins when the taxable income is below $75,300.

DianeW777Answer

Level 15

If I used your example with the basic standard deduction and four exemptions your taxable income is $123,171.

$151,971 - $12,600 (standard deduction) - $16,200 (4 exemptions) = $123,171

Of the taxable amount in this example $47,871 is in the 25% bracket. Until and unless your income is reduced by this amount part of the taxable income will remain in the 25% bracket.
As you can see for each $100 you reduce your taxable income you keep $25.

If you use your actual figures such as itemized deductions your taxable income will be much lower than our example. The next drop in rate to 15% begins when the taxable income is below $75,300.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

dmertz

Level 15

mammasboypowerspo, only the $71 that falls in the 28% tax bracket is being tax at 28% instead of 25%, a $2 difference. In fact, there may even be no difference if you have reported at least $71 in long-term capital gains or qualified dividends since these are taxed at 15% whether they would otherwise be taxed at 25% or 28%.