Tax bracket higher than taxable income

[evictor213]

I am looking at 2025 Premier Turbo Tax's Tax History form.

For Married Filing Jointly (MFJ) taxable income is approximately $1000 less than next tax bracket.  So why would the tax bracket show the higher rate? I specifically care, since I'll be subject to the "Kiddie Tax."

[ThomasM125]

Without knowing most specifics, there are several reasons why the tax on your return does not agree with the tax from a tax table. It is possible that you have other taxes on your return besides income taxes, such as penalty taxes for a host of things. Also, you may have income that has special taxes or rates imposed as can happen with investment income. It is also possible that your tax is being calculated using tax rate schedules as opposed to tax tables. 

After you pay for your return you can see the Tax Worksheet in TurboTax that will show you the worksheet used to calculate your tax if it was not done so by use of the tax table.

[mesquitebean]

If you're referring to the 5-year Tax History Report, a footnote on that form says "the tax bracket % is based on taxable income."  It's not clear what all you are seeing on that summary form.    In any case, here's how you can look to see what method(s) TurboTax is currently using to calculate your tax, which might provide some clue.   

Are you using desktop TurboTax?   If so, go into Forms Mode.   Bring up the Form 1040 Worksheet (may be abbreviated as 1040 Wks.)   When the Form 1040 Worksheet is displayed, scroll down to between lines 15 and 16.   You should see a Tax Smart Worksheet, which should show you which one(s) TurboTax is using.

If you are using Online TurboTax, you can also see that at any time by going to TAX TOOLS, then TOOLS,  In the Tools window choose "View Tax Summary".   At the Tax Summary screen go to the left menu column and click on "Preview Form 1040."  That will bring up the Form 1040 Worksheet.  Scroll down to between Lines 15 and 16 to the Tax Smart Worksheet.

[evictor213]

Yes, I am "referring to the 5-year Tax History Report, with footnote on that form says "the tax bracket % is based on taxable income." 

Seeking clarification on your reply.

I am looking at the 1040 Worksheet.  I see line 15, Taxable Income (same value as in my original message).

Between lines 15 and 16 I see the Tax Smart Worksheet --> the tax calculation is pulled from "Qualified Dividends and Capital Tax Gain Worksheet."  I can follow the Qual Div/Cap Gn Worksheet; it added lines 18, 21, and 22, which is my "Tax on all taxable income."

So...still not sure why Turbo tax is bumping me into the next Marginal Tax Rate.

Guidance welcome.

[evictor213]

There is definitely other taxes besides "Tax on all taxable income," as well as a small under-payment penalty. Are you saying that such things could bump my "Taxable income" into a higher tax bracket?

[mesquitebean]

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@evictor213 wrote:

There is definitely other taxes besides "Tax on all taxable income," as well as a small under-payment penalty. Are you saying that such things could bump my "Taxable income" into a higher tax bracket?

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No, I didn't mention anything about that.  I'm a fellow user, not a tax expert.   I didn't say anything specific about your particular tax situation or your bracket.  I'll let one of the tax experts address that.   I commented above mainly to tell you how you could find the method (or methods) that TurboTax is using for your calculation.  And the Tax Smart Worksheet I mentioned appears to have led to the Qualified Dividends and Capital Gains Tax Worksheet so that you could see the calculation that TurboTax did.   Maybe you had already been looking at that QDCGT Worksheet, but we wouldn't know that until now. 

In any case, let's see if TurboTax Expert @ThomasM125 returns to this thread during the day to explain in more detail about  marginal tax brackets and any thoughts on why yours might differ from what TurboTax displays in that 5-year Tax History Report, and I'll step aside to avoid any further confusion.    

[evictor213]

@ThomasM125 - Can you provide further insight? 
My taxes are being calculated from the Qualified Dividends and Capital Gains Worksheet.
Would tax penalties or something else bump up my "taxable income" into the next bracket?

Would an example of a something else be
Schedule 2 - Excess advance premium tax credit repayment, which was derived from Form 8962 Premium Tax Credit - Repayment of Excess Advance Payment of the Premium Tax Credit ?  This amount was >$1000.

Thank you

[RichInPitt · Accepted solution]

Is this the form that has an asterisk which says that the tax rate is based on AGI?  If so, ignore it.

If you had $10,000 in earned income and $400,000 in capital gains, MFJ, it would tell you you're in the 32% bracket due to $410,000 AGI.  You're not.  $10,000 in earned income puts you in the 0% bracket, below the standard deduction.  Your capital gains would be at a marginal 15%.

It doesn't even attempt to make it an accurate number