Why did increasing my income by 6% increase my federal taxes by 53%

[irishda53]

Ill look at the forms view

[SweetieJean]

Please answer TaxGuy Bill's question above so that we can figure out what's going on.
Also, everything is relative. $425,000 of income is huge to many folks, and paying only 2 or 4% in taxes on that seems very low.
<a rel="nofollow" target="_blank" href="http://fairmark.com/general-taxation/reference-room/2017-tax-rate-schedules/">http://fairmark.com/ge...>

[TaxGuyBill]

No, the total tax was probably not $9320.  Look at Line 63 of your Form 1040.  THAT is your total tax.

[irishda53]

it was the amount that I owed. Actual tax line 63  $56,362

[irishda53]

Forgive me, I'm a bit grumpy about this and it's late.

[SweetieJean]

56,262 divided by $420,000 is 13.3%.

[irishda53]

I must be missing something here. I'm NOT paying only 2 or 4% on $425,000, I'm not sure I inferred that. What I said was, on an increase of $25000 above what had previously been entered the tax bit jumped ...85% SweetieJean said.

[SweetieJean]

You said this:
"the tax against the income was 2.3% and went to 4.1%. almost double."
You are comparing the wrong figures. You have to look at the total tax liability (not the net due) before and after the $25,000 income was added.  Perhaps a fresh look at this tomorrow is in order.

[irishda53]

Probably, I'm fried. Thanks all of you!!

[SweetieJean]

See example below

[SweetieJean]

Federal taxes increased from $9,320 to $17,282. That's an increase of $7,962.

7,962 divided by $25,000 (increase in income) equals 31.8%. That represents approx 17% marginal Federal tax rate, plus approx 15% self-employment tax.  That is not a lot.

[SweetieJean]

Simplified example:

Taxable Income    $395,000                 $420,000

Tax Liability               56,000                     64,000  (8,000 difference)

Credits/pymnts         -47,000                    -47,000  (zero difference)

Net Tax Due                9,000                     17,000   ($8,000 difference)