Our total adjusted income was $149K, prior to adding a 1099-INT statement valuing $648, we owed $3 in Fed income taxes, once I entered it, we suddenly owed $225 - why?

[Chaernli]

When you entered the 1099-INT, your adjusted income increased by $648, so the total tax now is calculated from this higher value, and the tax bracket you are in is the percentage by which this increase is calculated.

[dmertz · Accepted solution]

The roughly 34% marginal tax rate is likely due to either the additional $648 of taxable income increasing the taxable amount of some other income such as Social Security benefits, the pushing of some amount of long-term capital gains or qualified dividends to be taxed at 15% instead of 0%, or to a decrease in some sort of tax credit caused by the increase in AGI.  You would have to examine your tax return side-by-side with and without the additional $648 to know what side-effect is the cause.