How is this possible?

Forum|Forum|1 year ago
March 6, 2025
2 replies
1 view

I'm a pastor, married filing jointly, on a single income, with 4 young kids. This is what TT's summary says:

"After applying your deductions, your taxable income was $41,136. Based on this, your total tax before credits was $19,020, which includes self-employment tax of $14,663."

How is my total tax before credits $19,020?!?

How am I in a tax bracket where I'm being taxed 46% of my taxable income?

SharonD007

Level 14

Were you paid on a W-2 or a 1099-Misc or 1099-NEC? Did you have a housing allowance that should have been excluded from your income. Please provide more information so we can assist you. Please clarify.

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joshwatsAuthor

Level 2

I got a W-2 from the church I work at for 58k, a 1099-MISC for 20k for royalties from a homeschool curriculum, and a 1099-NEC for $900 for being a guest speaker. So 79k total. Housing allowance $23,400.

I just can't grasp how, if after deductions, my taxable income is reduced from 79k to 41k, I still have taxes of 19k before credits. That's a tax rate of 46%!

Vanessa A

Level 15

To have $14,663 in self-employment taxes, it seems as though the majority of your income is being counted as Self-Employment Income.

Your housing allowance is not taxable for regular federal income taxes, but it is taxed the 15.3% Self-Employment Tax. After you entered your W-2, if you selected Clergy, you would have been given the option to choose which income should be taxed with self-employment. If you chose to pay self-employment tax on your housing allowance and wages, then this would explain why you have such a high amount of self-employment taxes.

If SE taxes were withheld, be sure that you choose to only have the SE taxes withheld on your Housing Allowance if it is included in your W-2 and you did not have Medicare and social security taxes withheld already on the housing allowance.

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larrywa2

Level 2

You're right - this is beyond even the maximum tax bracket (which your income doesn't qualify for). I don't think this is a problem that can be easily solved on the community chat forum - there may be more than one reason the software miscalculated, for instance. The most useful thing I can say is this - If you sign up for the TurboTax Advantage plan, that gives you an opportunity to discuss this (and other) problem/s over the phone with a tax prep representative. It's an extra $50, btw, but may be worth it.