Why are my blended tax rates so much higher in 2024 than 2023?

[lmarsh327]

4 times the amount!

[ThomasM125]

You would have to compare your income amounts by source between the two years to see what changed. I suggest you compare each income entry on page one of your Form 1040, line by line, with the same entry in the previous year and then investigate further the entries that changed significantly.

To view your form 1040 and schedule 1 to 3:

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done 

[lmarsh327]

I dont see a tax tools option anywhere. Can you please provide specific navigation, such as the landing page URL?

[JohnB5677]

If you are in TurboTax Online Tax Tools are under Federal on the left sidebar.  

You may have to minimize the Federal and State options to see it.

Blended tax rate will fluctuate based on income, but also based on how certain income is taxed.

• If you had Capital gains, a home business or other special taxes, they would be a factor.
• Also, tax credits are not deducted from the total tax for the calculation.

The Blended tax rate is calculated under Federal / Federal Review

• To access it, all questions must be answered in the Federal Review.
• At the end of the questions. Look at the bottom of the screen
• It will say Get a detailed view of your numbers

The Blended Tax rate is: 1040 Line 18 divided by Line 15

• Tax liability, Total Tax Line 18
  • Including SE tax, capital gain and special taxes
• Taxable income, Line 15
  • Total income minus deductions, but before credits

To compare Blended rates from previous years you will need the earlier tax returns.

[smarsian]

Ours went from 13.8 to 31.6% and we made less money?  I feel like something is wrong?

[AmyC]

The only thing that that stands out is if you both had w2 income last year and then one or both of you became a contractor. A w2 employee has Medicate and Social Security taxes withheld while a contractor needs to pay those taxes, called self-employment tax. SE tax is 15.3% SE tax on 92.35% of your Net Profit greater than $400. If we add last year 14% + 15% SE tax =29% which is close to what you are saying. Maybe both of you did some contract work to bump that up a bit more.

See What is the self-employment tax?

The other option is you got a 1099 of some sort that was not for work but was entered as work.

If you don't see a list of options on the left, select the hamburger icon. Then you can select tax tools to preview your return.

[Danielbarrett]

turbo tax is telling me my blended tax rate is higher than line 18  divided by line 15 on my 1040 sheet. Why is this?

[LenaH]

It depends. The blended tax rate tends to be a complicated formula and is not just Line 18 divided by Line 15 on your 1040. 

Income is the Adjusted Gross Income from Form 1040, line 11. Then, make the following adjustments:

+lump-sum distributions from qualified retirement plans and special averaging or capital gain treatment is selected on Form 4972

+Also, if the distributions include net unrealized appreciation in employer's securities, and the option is selected on Form 4972 to include this in the tax calculation, the amount of the net unrealized appreciation is also added to the income

=Income for the Effective Tax Rate Calculation

Tax is calculated starting from Form 1040, line 15. Then, make the following adjustments:

• the recapture tax from Form 8863 (Education Credits) or the tax from the IRC Section 197(f)(9)(B)(ii)election for an additional tax
• the smaller of the nonrefundable credits shown on line 55 of Form 1040 or the remaining tax is then subtracted 
• Taxes shown on lines 57 through 61 on Form 1040
• the Fuel Tax Credit from Form 4136
• the Child Tax Credit from Schedule 8812
• the refundable portion of the American Opportunity Credit from Form 8863
• the Net Premium Tax Credit from Form 8962
• the Health Coverage Tax Credit from Form 8885
• the Credit for U.S. Tax Paid to the Virgin Islands and the Earned Income Tax Credit

=Tax Amount for Effective Rate Calculation

@Danielbarrett