High tax burden on savings account interest 1099-INT.

[korsibor]

I made an interest of $1172 on my savings account. After entering this data from the 1099-INT my federal tax burden increased by $619 (52% of interest) and $52 ( 4% of interest) increase on my state tax burden. 

 Is this correct or is TT miscalculating my taxes? I am paying almost 60% of the interest I made in taxes when my tax bracket is 37%

[HelenC12]

What might be happening is the addition of the $1,172 interest income not only increased your taxes but some of your tax credits may have decreased due to the increase in income. 

To figure out how the $1,172 interest income affected your income tax return, do a comparison. 

1. Print out a copy of your tax return with the $1,172 interest income.
2. Delete the interest income (Form 1099-INT) and print out a copy of your tax return.
3. Do a line by line comparison to see which amounts were affected. 

[korsibor]

That will be one way to approach it but I can't print my tax forms without haven't paid for turbotax.

In addition, I didn't think 1099-INT has any state tax implications but my state tax burden increased.

[DawnC]

If you are using TurboTax Online, you can preview your Form 1040 and state tax summaries to compare them before and after the 1099-INT entry.   Form 1040 will show along with Schedules 1, 2, and 3.    When you are previewing Form 1040, click on your State Summary in the left side panel - you don't see the actual state form, but you will see the summary which will allow you to compare certain key numbers such as:

• Federal AGI
• Your state AGI
• Itemized or Standard Deduction
• Taxable Net Income
• State Tax - before and after credits
• Total Credits
• Total Tax Liability

Also, make sure you go through the state return completely before doing any comparison.   Check the tax summary with the 1099-INT entered and then delete it and see which key figures changed.   Each state is different and they all have their own rules and tax regulations.   If you have a specific question about a change you see, be sure to tell us what state you are filing for and if you are filing any nonresident states as well.   The example below is a summary for Maryland - your state summary should be similar.

[dburns0000]

It might have put you in a higher tax bracket.

[ThomasM125]

One possibility is you had an earned income credit before you enetered the interest income and the additional unearned income removed your eligibility for it. Once your unearned income goes over $10,300 in 2022 your earned income credit is not allowed, so even a one dollar increase in income can remove a large earned income credit and dramatically increase your net tax.

You can look on line 27 of your form 1040 to see if you had an earned income credit before you entered your interest income.

You can view your form 1040 and schedules 1 to 3 while working in the online version of TurboTax by following these steps:

1. Click on Tax Tools in the left menu bar
2. Click on Tools
3. Look under Other Helpful links….
4. Choose View Tax Summary
5. Look in the left menu bar and choose Preview my 1040
6. Scroll down the page to see form 1040 and schedules 1 to 3

[korsibor]

I’m already in the highest bracket

[Opus 17]

There's really no way to know without printing your returns before and after and looking at them side by side. If you pay for Turbotax online, you don't have to file right away.  You can go back and make changes, print different variations, and then transmit your return when you are satisfied.  Or, you can install Turbotax on your own computer from a CD or download.  You have to pay up front, but the desktop program allows you to view and print your forms at any time.

Assuming there is not a typo, it sounds like you became ineligible for some kind of credit because your income crossed a threshold, but it's hard to guess what that might be.  Also possibly, the increase in income changed the taxability of social security benefits, if you are receiving benefits.  If you have subsidized Marketplace insurance, additional income might change your eligibility for the subsidy.  There are too many possibilities to guess. 

[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.

I once added $6 in interest and the tax went up $12! It pushed me into the next tax bracket. I was right at the line.

[Opus 17]

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@VolvoGirl wrote:

I once added $6 in interest and the tax went up $12! It pushed me into the next tax bracket. I was right at the line.

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That's not due to tax brackets, that's because of how the tax tables work. Rather than having taxpayers calculate percentages, the IRS publishes tax tables, and the software uses the same tables.  For example, a single taxpayer with income between $62,650-62,700 will pay $9,406 in tax.  If you go over $67,701, the tax jumps to 9,417, an $11 increase, regardless of whether your income changes by $1 (from 67,700 to 67,70) or by $51 (from 62650 to 62710).  It averages out over the population but can hit some people extra hard. 

The tables are here, if you are curious.

https://www.irs.gov/instructions/i1040tt

But that does not explain the size of this taxpayer's change.

[Mike9241]

we can't see your return but an increase in income can not only reduce some credits but you may be subject to the net investment income tax. certain deductions may be limited or eliminated. if you have a qualifying business and you got a QBI deduction on line13 of your 1040. you may have hit the income cap reducing it.

certain retirement contributions can be reduced or eliminated