Turbotax - income vs deductions???

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cliff
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Joined: Sun Mar 04, 2007 3:21 pm

Turbotax - income vs deductions???

Post by cliff » Sat Apr 17, 2010 6:56 pm

Running some estimates on TT for next year. Solidly in 25% bracket. Why when I put in additional income do taxes increase more then 25%? Why do taxes decrease less then 25% when I put in a deduction (i.e. charity, mortgage interest)? Neither change impacts tax bracket.

avalpert
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Re: Turbotax - income vs deductions???

Post by avalpert » Sat Apr 17, 2010 7:03 pm

cliff wrote:Running some estimates on TT for next year. Solidly in 25% bracket. Why when I put in additional income do taxes increase more then 25%? Why do taxes decrease less then 25% when I put in a deduction (i.e. charity, mortgage interest)? Neither change impacts tax bracket.


Deductions begin to phase out for income above ~167k for married filers.

livesoft
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Post by livesoft » Sat Apr 17, 2010 7:03 pm

There are phaseouts for various credits. This is why the concept of "marginal income tax bracket" is fleeting.

You also didn't state where your income comes from. Different kinds of income have different tax rates: wages, qualified dividends, LT cap gains, social security are all taxed differently.

cliff
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Post by cliff » Sat Apr 17, 2010 7:12 pm

All wages although from a pension...not near 167k...how is SS taxed differently?...thanks

sscritic
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Post by sscritic » Sat Apr 17, 2010 7:28 pm

Are you saying some of your income is from social security? If so, your marginal tax rate might not be 25%. See Grabiner's entry in the wiki on taxation of social security benefits.

http://www.bogleheads.org/wiki/Taxation ... y_benefits

cliff
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Post by cliff » Sat Apr 17, 2010 7:30 pm

No..income is from state pension

sscritic
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Post by sscritic » Sat Apr 17, 2010 7:38 pm

cliff wrote:No..income is from state pension

Sorry, you mentioned SS in your previous post and asked if it were taxed differently. I thought you were collecting.

pshonore
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Post by pshonore » Sun Apr 18, 2010 7:41 am

If your itemized deductions are below the standard deduction ($11400 for most), then increasing deductions has no effect until you get over the $11400 limit, so say your itemized deductions total $9500, you will see no benefit from increasing them until they exceed $11400.

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