How can $1 make this big a change?

[kayakyakr]

I was playing around with entering business expenses and suddenly my tax bill changed by over $2k. Before putting in business expenses, my tax bill is $5400. If I put in $8340, my tax bill is $3400, and this is what I would expect. BUT if I put in $8341 in expenses, that drops to $1000. $1 difference => $2.4k in savings?

The thing that I can see changing with that $1 is that the income & adjustments top-line jumps $10k. I don't know how to break that down as to why that $1 = $10k, and I can't figure out why it would do that. I can justify expenses up to that much, but it does increase audit risk.

[SweetieJean]

First be sure you didn't mistype a comma or decimal.  Then compare the two scenarios side by side.

[kayakyakr]

No typo: the change is truly just $1.

The only breakdown I have found is the tooltip that shows at the top. Total income changes by $10k as I add and remove the $1.

Is there anywhere to see how TurboTax is doing that calculation without having to drop into forms and look at each to see what is changing?

[kayakyakr]

Found it. Unemployment compensation exclusion cuts in at $150k AGI and does not have a soft ramp. The $150k is apparently the same if you're married filing jointly or filing separately, which actually might make it make sense for us to file separately.

[VolvoGirl]

So the $1 change put you over or under the 150,000?  

[kayakyakr]

Yup, it flips the switch on 149,999 to 150,000.

That 150k doesn't change filing jointly or separately. US Tax Code is so dumb sometimes.

[macuser_22]

The unemployment exclusion was a last minute amendment slipped into the American Rescue Plan by the Senate.    

“(1) IN GENERAL.—In the case of any taxable year beginning in 2020, if the adjusted gross income of the taxpayer for such taxable year is less than $150,000, the gross income of such taxpayer shall not include so much of the unemployment compensation received by such taxpayer (or, in the case of a joint return, received by each spouse) as does not exceed $10,200.

On a joint return there is only one AGI that applies both both spouses.

[fanfare]

Take the deductions you are eligible for.

Every once in a while someone will have an AGI of $149,999 exactly.

That shouldn't trigger any audit.

NJ State tax has a different hard cutoff amount of $100,000. for other purposes.