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Old 03-14-2017, 08:10 PM
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Marginal Tax Rate

My tax bracket is 33%. Last year, I had an increase in income. My marginal tax rate (increase in taxes / increase in income) was 47%.

AMT seems to make up approximately half of the discrepancy, but not all of it. Is there anything else I should check or that might have phased out?



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Old 03-15-2017, 03:34 AM
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My tax bracket is 33%. Last year, I had an increase in income. My marginal tax rate (increase in taxes / increase in income) was 47%.====> The marginal tax rate is the incremental tax paid on incremental income. If a household were to earn an additional $10k in wages on which $1.53k of payroll tax and $1.5k of income tax was paid, the household?s marginal tax rate would be 30.3 percent.

AMT seems to make up approximately half of the discrepancy, but not all of it. Is there anything else I should check or that might have phased out?====>I guess it depends; The AMT has only a modest impact on the average marginal tax rates for most sources of income because it raises marginal tax rates for some taxpayers and lowers marginal tax rates for others. the impact of the AMT on the marginal tax rates that apply to various components of taxable income. They also consider the impact of several AMT reform proposals on the number of AMT taxpayers, total AMT liability, and the marginal tax rates that apply to wages, capital income, and deductions such as local and state taxes and charitable gifts. Some experts find that average marginal tax rates on many individual income components, such as wages and interest income, are affected only modestly by growth in the AMT



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Old 03-15-2017, 10:51 AM
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Thanks, Wnhough. We are using the same definition of marginal tax rate. Using the numbers for your example, my income went up 10k and my taxes went up 4.7k, year-over-year. It is only federal withholding and medicare (Soc Sec has phased out).

Your analysis has indicated that AMT should normally have only a modest impact on marginal tax rates. So in your experience, would it be worthwhile to have someone look into this?



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Old 03-15-2017, 02:01 PM
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Quote:
Originally Posted by ccm8111 View Post

#1Your analysis has indicated that AMT should normally have only a modest impact on marginal tax rates.



#2So in your experience, would it be worthwhile to have someone look into this?
#1; Not only i myself but many experts's analyses
#2;frankly i am not very sure of it in my experience;however, i guess it 'd be worthwhile to look into it , depending on the situation, matter of fact,High-income taxpayers with large tax write-offs?dependents, high property taxes*and high state income taxes, for instance may find themselves paying the tax, which works by taking away deductions for an overall higher tax bill. Unfortunately, in reality over the years, what was once considered high income is now decidedly upper middle class, but the AMT hasn?t been adjusted appropriately. It has not historically been indexed to inflation the way the rest of the tax code is. So earners you wouldn?t necessarily tag as super wealthy get hit with the tax bill;so as we know, Congress has been ?patching? the AMT by passing temporary legislation to bump up the income threshold before you?re stung by it (and finally made the patch permanent in 2013), but it still affects more upper-middle-class taxpayers than intended.However, the taxable income for AMT rule as weknow is the number that was recalculated under AMT rules without all the allowed deductions and credits. So even if the minimum tax rate is lower than your marginal income tax bracket, your taxable income is higher so you?ll pay more. So, If you?re paying the AMT, you are paying higher taxes.



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Old 03-15-2017, 06:09 PM
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You helped me figure out my problem, Wnhough. Thanks!

Knowing that I should be skeptical of the marginal tax rates, I checked my calculation. I was including state taxes in my tax increase...oops! My marginal federal rate then becomes 35%...very close to my 33% bracket rate.

And I couldn't agree more with you on the AMT. I only deduct for kids, state/local taxes, and mortgage...hardly a lot of loopholes. Well, I guess that depends on your definition of loophole.



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