I reported $20 on my 1099-INT and my refund changed by $12. Given that I am in the $87,001 - $180,000 bracket, I should be taxed at 37%. Why am I taxed $12 and not $7?

[AnthonyC · Accepted solution]

The likely explanation is due to the way the tax table itself works.  It is not a straight percentage, but rather a graduated rate, where every $50 of income results in additional tax due.  Its possible to see a small amount of interest push you over into the next $50 bracket, which then causes an increase in tax liability.  

For example, a single taxpayer with $87,140 in taxable income would have a tax liability of $17,520.  But, by entering $20 in additional income for a taxable income of $87,160, that same taxpayer would now have a tax liability of $17,533 - a $13 increase. It might be easiest to see if you look at the tables themselves at the link below -

https://www.irs.gov/pub/irs-pdf/i1040tt.pdf