Our income increased by 17,613 but we are still in the same tax bracket as before. However, this year we owe $3.5K instead of being owed. Is this possibly correct?

[MaryK4]

It is possible- unfortunately, it depends on the amount of withholding.  

[cbailey0320]

Yes, for three possible reasons.

1) If you did not adjust your W-4 for the additional income settings, such as withholding additional taxes out of every paycheck, you would certainly owe extra.

2) If you are an ACA participant when your income exceeds what is allowed for the payment assistance, you will have to pay it back (something that hit me very hard this year). 

3) The tax tables had been reset to give you more income back in your paycheck, but unfortunately, at the end of the year, you wind up owing if you do not reset your W-4 to adjust for this. 

I had about the same increase in income you guys had this year and we have to pay back around $5,500, a combination of not resetting my W-4 to account for the fact that we had two full-time, full-year incomes again finally, but also paying back the credit on the ACA. I had not planned for either one. Yikes!