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Old 02-02-2015, 02:25 AM
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Tax bracket change

Hi everyone,

I'm in a desparate situation due to joining a higher tax bracket. I just entered my information on TurboTax and looks like I owe big time. I need some clarifications.

Here's my situation (I'm not giving actual values due to privacy concerns):

I belonged in bracket 1 ($0 - $30,000, 15%) and now due to a recent salary increase, I'm in bracket 2 ($30,001 - $60,000, 25%). Assume my salary is $32,000 now.

1. Do I get taxed 15% for the first $30,000 and 25% for the rest? If so, could you point me to the IRS document that describes that? If not, the system seems pretty unfair because my salary increase came in end of the year and I'll be paying the higher rate for the entire year.

2. I'm on the very margin of the tax bracket. So does applying the personal exemption (say $3000) bring down my income from $32,000 to $29,000 hence change my tax bracket?

Many thanks for your time.



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Old 02-03-2015, 12:54 AM
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1. Do I get taxed 15% for the first $30,000 and 25% for the rest?=======correct; Your tax bracket is the rate you pay on the "last dollar" you earn
If so, could you point me to the IRS document that describes that?======== http://www.irs.gov/pub/irs-drop/rp-13-15.pdf

If not, the system seems pretty unfair because my salary increase came in end of the year and I'll be paying the higher rate for the entire year.=======I guess your salary increase already reflects annual inflation rate in it.

2. I'm on the very margin of the tax bracket. So does applying the personal exemption (say $3000) bring down my income from $32,000 to $29,000 hence change my tax bracket?=====of course;personal exemption deduction lowers your taxable income and tax bracket.



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Old 02-03-2015, 02:05 PM
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Thanks, Wnhough. Very helpful.



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Old 02-03-2015, 08:02 PM
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Quote:
Originally Posted by uncle_sam View Post
Thanks, Wnhough. Very helpful.
you are very welcome



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