My household gross income is 105K. What is the next tax bracket?
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Anonymous
| Hi. I'm currently negotiating salary increase and am cautious about going into a higher tax bracket. Now, I'm making 105K(gross) What is the income amount to enter next tax bracket for a couple with one child? |
Anonymous
| OP)) By the way.. I live in VA. |
Anonymous
| I don't think you really understand how tax brackets work. Only the marginal income is taxed at the higher rate. |
Anonymous
| More money is strictly preferred to less money. If you enter a higher tax bracket, only the delta between your salary and the minimum of that bracket will be taxed at the higher rate, not your entire salary. |
Anonymous
I think you probably need to explain that even more clearly to OP given the ignorance. OP, what "marginal rates" means is only the income above the prescribed amount is taxed at the marginal rate. But to answer your question: You have $105,000 gross income you said. Didn't see whether you were married or not. But let's assume you have basic exclusions for retirement contributions and health insurance premiums provided by your employer and maybe a flexible spending account. Say those add up to $15,000 total. Now you're down to $90,000. Then let's say you claim the standard deduction. If you are single, you get a $12,000 standard deduction from the $90,000. So your taxable income is $78,000. The first $9,525 of that is taxed at 10% (so, $952.50 in tax); the amount between $9,526 and 38,700 is taxed at 12% (so $3,500 in tax); the rest of your income is taxed at 22% (so, $8,646 in tax). Total tax is: $13,098. And if you have any children, subtract $2,000 per child from that amount. The next tax bracket kicks in a $82,501 of TAXAABLE income. So, you could earn another $4,000 or so before going into the next tax bracket. And in that case, income above $82,501 only would be taxed at 24% until your taxable income exceeded $157,500. So basically, it would be a 2 percentage point increase on the income between $82,500 and $157,500 of TAXABLE income (i.e. the income you have left after your exclusions and deductions). |
Anonymous
| You said you are a "couple." If you mean "married filing jointly" then basically your entire income is in the 12% bracket. You'd have to earn around $12,000 more before you got into a higher bracket. |
Anonymous
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Ugh this is painful OP.
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Anonymous
| Well, bottom line is there's no need to be "cautious" about going into a higher tax bracket. It's not like that triggers a bunch of new taxes on the income you have now. |
Anonymous
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There is no reason to be concerned about going into a higher tax bracket. You will never, ever lose money by hitting the next tax bracket because all of your current income is still taxed at the exact same rates it was before-- at worst, some of your raise will be taxed slightly higher. Tax brackets only apply to the portion of your income that falls in that bracket.
For example, the top of the 10% Married Filing Jointly bracket in 2018 is $19,050, so all your income under $19,050 is taxed at 10%. Then the top of the 12% MFJ bracket in 2018 is $77,400, so all your income between $19050-$77400 is taxed at 12%. The 22% MFJ bracket is $77,400-$165,000, so each additional dollar above $77,400 will be taxed 22% until you hit $165,000 at which point it'll start being taxed 24%. |
Anonymous
That is, all dollars between $77,400-$165,000 will be taxed 22%-- dollars $165,000-$315,000 are taxed 24%. |
Anonymous
Don’t mention this to your boss. They may realize your skills are lacking. |
Anonymous
hope it's not a CPA position. |
Anonymous
Anonymous
| Oh honey... |
Anonymous
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There may be reasons not to want to increase salary in certain circumstances, but not OP's. For example, last year my taxable income (after HSA and IRA deductions) was hovering right at the $80K mark. Singles who earn up to $80K can take the full American Opportunity Tax credit for college of $2,500. You get a prorated reduced amount with income up to $90K. And then nothing.
I was trying to decide if I should take on freelance work and what that would do to that credit since I'd be putting in the work but reducing a very good tax credit. |