I subtract 1k from wages, ttax deducts $240 from fed bill due. When I subtract 1k from 1099 int, ttax subtract $278 from fed bill due. Why the difference both are income.

[dnorment29]

I always thought that INT income from a CD, would be treated the same as wage income. I am in the 24 percent tax bracket. as a test case, I subtracted 1k from my wages, turbo tax correctly deducted $240 from fed bill due. But when I subtracted 1k from 1099 int, turbo tax subtracted $278 from fed bill due. Why the difference? I thought that 1099 INT income is treated as wage income. Seems as if turbo tax is charging me a higher tax rate on 1099 INT vs wage income. I'm filing married jointly with around 200,000 combined income (24 pct tax bracket)

[VolvoGirl]

You would have to print it out before you change it and after to compare what changed.  Interest might change some extra investment tax like the NIT and Medicare tax on high income.  Did you subtract the interest after subtracting the W2 income so 2,000 was subtracted or do them separately like put back the W2 1,000 then subtract the interest 1,000?   Because if the W2 was still less then reducing the CD interest would be cumulative.  

[dnorment29]

I only did one at a time. I made sure to undo the first change before doing the 2nd.

When I subtracted 1k from my wages, 240 were deducted from what I owed in federal taxes. I then added 1k back to wages, which added back 240 to what I owed in federal taxes.

Next I removed 1k from my 1099 int (interest from a Bank CD I had). Turbotax deducted 278 from what I owed in federal taxes. Why did Turbotax tax deduct 278 vs 240? I am in the 24 pct tax bracket. Shouldn't income from interest be treated the same way as income from wages?

Thanks

[KeshaH]

It sounds like you're paying net investment income tax (NIIT) on your interest income. The NIIT is an additional 3.8% which works out to $38 on $1,000 of income. 

[dnorment29]

I'm filing married jointly. AGI is 270+k. NIIT i believe starts at 250 for married filing jointly. Wow I didn't know I would get hit with it bc I thought it had to do with inherited income, but from what I am reading it is anyone filing jointly with a AGI over 250k (even if none of it came from a inheritance) All investment incomes, for example interest from a CDs,  get hit with a addtional 3.8 tax.

Am I reading this right?

Thanks again.

[ThomasM125]

Yes, it applies to your modified adjusted gross income. It is not associated with inheritance, which is typically not taxable for federal income tax purposes.