Tax brackets are not a flat 22% of taxable income. Tax brackets are graduated. That means the more you make, the higher the tax rate and the more taxes you pay. For example: For tax year 2021, if you're filing status is Single and your taxable income is over $40,525 but not over $86,375, the tax is $4,664 plus 22% of the amount over $40,525. To see the other tax brackets, click here.

Question

Why is my inherited IRA taxed at 28% when I am in the 22% tax bracket?

Forum|Forum|4 years ago
February 14, 2022
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HelenC12

Tax brackets are not a flat 22% of taxable income. Tax brackets are graduated. That means the more you make, the higher the tax rate and the more taxes you pay.

For example: For tax year 2021, if you're filing status is Single and your taxable income is over $40,525 but not over $86,375, the tax is $4,664 plus 22% of the amount over $40,525.

To see the other tax brackets, click here.

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VolvoGirl

Employee

And you are not taxed differently for IRA or 401K. It gets added to your total income and more income can push you into a higher tax bracket.

When you enter one taxable transaction, you can't just watch the monitor. You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A. And by increasing your AGI it might reduce some credits you were getting like EIC. And can make more of any Social Security taxable.