1099-NEC taxes not adding up

[Mike354]

Most of our income comes from W-2s, but I have one 1099-NEC for $5,000. After it's all said and done, adding that one NEC increases our Federal taxes due by $2,326 and my state taxes (CA) by $451. I know NECs are taxed differently (income tax + 15.3%), but nothing I've come across explains how I would end up paying $2,777 in taxes on 5K. We are filing jointly and our income is in the "$89,451 to $190,750" / 22% bracket. I'm figuring at most 5K at 37.3% -- for Federal taxes -- would be 1,865 not 2,326... I would be thankful for an explanation if anyone can figure this out. Thanks!

[rjs]

Changes in a tax return sometimes have side effects. The additional income might reduce or eliminate some credits or deductions, or make more of your other income taxable. Compare your Form 1040 line by line with and without the 1099-NEC and see where the differences are. If an amount that changes on the 1040 comes from a schedule or another form, you might have to look at that schedule or form to see what's happening.

[VolvoGirl]

When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A.  And by increasing your AGI it might reduce some credits you were getting like EIC.  And can make more of any Social Security taxable.

You would have to compare both returns line by line before and after you entered the income to see all the changes.