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drives2fast
Returning Member

Different tax rates for pensions on the same joint filing

Why would my wife's pension be taxed at a different tax rate than my pension when filing a joint return. Both pensions are about the same value, mine has a federal tax rate of 27% and my wife (who doesn't work) is at 37%.  I thought that since we are filing jointly, both would be based off of the combined earned income and be taxed at the same 27% tax rate. Note: we live in TX, so there is no state tax involved and the combined earned income with the pensions did not cross into the upper tax bracket.

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3 Replies
JohnB5677
Expert Alumni

Different tax rates for pensions on the same joint filing

Please clarify your question.

  • How did you determine what each pension was taxed at?
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Different tax rates for pensions on the same joint filing

Why do you think they are being taxed differently?  There is only one tax on all your income combined.  Did you notice the tax change when you entered each 1099R?  

When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

 

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A.  And by increasing your AGI it might reduce some credits you were getting like EIC.  And can make more of any Social Security taxable.

drives2fast
Returning Member

Different tax rates for pensions on the same joint filing

Both pensions were nearly the exact amount.

I tested it by performing our taxes as if there was only one pension received and comparing the results.

If I entered only her pension (against her name), no other changes to the tax return, I observed the tax return being reduced by $x.  If I added $x to what she already paid federal taxes on for the year against her pension, it came out to a total of 37% fed taxes.  When I performed the same test with my pension (same dollar figure, but under my name, employed, but not contributing to the pension) it resulted in a calculated 27% fed tax rate. The only difference is that I am employed and she is not.

I understand how having them combined can potentially introduce other changes.  That's why I tested them individually.  And when I combine them together, the taxed amount and final tax return is the same if I were to add the individual test runs together.

I just found this interesting and a bit confusing.

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