Federal tax calculation ERROR (2025 TurboTax Desktop)

[user17704151510]

There is a problem with the calculated federal tax amount (simple examples below).

example #1:

• filing status: Single
• Interest income (no W2):  $25,750
• Standard Deduction:  $15,570
• Taxable amount $10,000
• Tax *should be*:  $1,000
• TurboTax shows: $1,003

example #2:

• same as above, except Interest income: $20,750
• Taxable amount $5,000
• Tax *should be*:  $500
• TurboTax shows: $503

[AnnetteB6 · Accepted solution]

The examples given in your question for the TurboTax tax amount are correct.  The tax amount comes directly from the tax tables published by the IRS since interest income is not subject to the lower capital gains tax rates.

Here is a link to the 2025 tax tables:  IRS 2025 Publication 1040

[dmertz]

As AnnetteB6 mentioned, the results in TurboTax, which are correct, come from the fact that for taxable income below $100,000 you are required to use the tax tables.  At taxable income of $3,000 and above, the tax tables are implemented in steps of $50 and the tax is calculated on the midpoint of the step.  This means that for $10,000 of taxable income, the tax is calculated as 10% of $10,025 = $1,003 (rounded).  Similarly, the tax on $5,000 is calculated as 10% of $5,025 = $503.  You can demonstrate this stepwise characteristic by seeing that the tax on $10,049 is still $1,003, not $1,005.  The tax on $10,050, just $1 more, jumps to $1,008 because it is calculated as 10% of $10,075.