I made a lot in 2020 because I sold some long holding tech stocks. So I am in the 37% tax bracket.
So when I entered a bank interest, I noticed that my marginal rate is 43.8%! How can that be?
If I fake the interest to be $1000, the FED tax increases by $438. If I fake it to be $100, my tax increase by $44.
Shouldn't my marginal be 37% + 3.8% obamacare surcharge = 40.8%?
Please help. I checked my AMT in TurboTax is $0 and my underpayment penalty is $0 (because I planed the stock sales via W4 withholding).
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Reporting the bank interest may have placed you into another tax income bracket that raised your marginalized tax rate.
Not really. My tax bracket was already 37% before I put in my interest income. Total income was > 600K.
At this point, you might look at the Schedule D Tax Worksheet to determine how your income is really being taxed.
I looked and didn't see anything. I suspect it's some kind of unknown deduction that gets disallowed after income goes higher.
I believe @Christing123 is correct, some deduction or credit is changing when you add more income, so your taxable income is going up more than the amount of the additional income that you entered.
You can look at your form 1040 while working online with TurboTax to see what is changing as follows:
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