Tax bracket edge

Forum|Forum|3 years ago
September 28, 2022
1 reply
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Is it better to jump across tax brackets even if it's only over by 5-10k? I am getting a promotion and it will surpass the 89k tax bracket and put me into the next by 10k

rjs

Employee

It's always better to make more money. Your income is not all taxed at the rate of the highest bracket. Only the portion of your income that falls in the higher bracket is taxed at the higher rate. The rest is still taxed at the lower rates.

For example, if you are filing as single the top of the 22% bracket for 2022 is $89,075. If your taxable income is $!00,000, it exceeds the top of the 22% bracket by $10,925. But only that $10,925 is taxed at 24%. All your other income is taxed at the same rates that would apply if your taxable income did not cross the top of the bracket.

Also note that the tax is calculated on your taxable income, not your total income. Taxable income is your Adjusted Gross Income (AGI) minus deductions (the standard deduction or itemized deductions).