Interest Income

Forum|Forum|6 years ago
February 27, 2020
1 reply
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I added $100 of interest income from a 1099-INT, and my "federal tax due"went up around $40. That marginal rate implies an income of over $1,000,000 which is way way more than we made. Please explain. Thanks.

Best answer by ThomasM125

There could be other credits on your tax return such as education, child care, or child tax credits that may be unfavorably impacted by adding additional income. Also, alternative minimum taxes, net investment taxes and other taxes are also sensitive to income adjustments.

TurboTax uses tax tables to calculate your tax, as opposed to using the tax rate schedules, so there may be a slight difference between your the taxes calculated using one method or the other.

To nail it down, you would have to print your return before the additional income was added and after to see what changed, then investigate as required.

MinhT1

Level 15

When you add $100 extra taxable income to your return, your tax liability will go up, but your income-based credits such as the Earned income credit could go down, resulting in a larger increase in tax due.

In short, the increase is not only due to the increase of your tax imputable to the extra income, but also on other factors on your return.

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scott18

Level 2

Hello Tax Expert,

I have the same situation. My last entry for my 2019 Turbo Tax was to enter interest income from a K-1 that I just received. After entering the interest from the K-1, my federal taxes due went up 39.7% of the amount of the interest from the K-1. I should be in the 35% tax bracket based on my taxable income.

I don't have any earned income tax credit.

Why would this be?

ThomasM125Answer

Level 15

TurboTax uses tax tables to calculate your tax, as opposed to using the tax rate schedules, so there may be a slight difference between your the taxes calculated using one method or the other.

To nail it down, you would have to print your return before the additional income was added and after to see what changed, then investigate as required.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"