Went through two massive, unexpected raises this year...the wife gets a biggun next year.

Long story short, I MIGHT be jumping the $148k bracket this year and absolutely WILL jump next year.

Has anyone gone through a similar situation? If so, how bad was the sting? I have two awesome children and two DSAs maxed out.

 

Here's the joint filing marginal brackets:

source: http://www.forbes.com/sites/kellyphi...unts-and-more/

Basically $10K + 25% of the excess over 74k.

It's a marginal rate so if you're already close to 74k and not making much over, you won't see that much.

So if you were making 73799 and now you make 73801...you'll pay $0.25 more in taxes.

People always forget it's a marginal rate. It's not like you get bumped into the next bracket and now they're paying a crap ton more.

I got bumped from the 15% bracket to the 25% bracket from last year to this year (I started working in July of 2013, so only earned half a years salary that year). I'm going to basically pay about $5k more in taxes this year but then again I'm making double what i made last year so makes sense.

Otherwise there are ways to deduct your taxable income in different ways (traditional IRA/401k, business expenses, charity, etc.) and can look into tax credits as well. There's quite a bit of info on that.

But otherwise, it probably won't be bad..unless your salary is bumped significantly.

 

I did yearly blog posts looking at "the marriage penalty", since I got bit by it the entire time I was married. On top of that, the first year, I changed jobs midway through the year. Neither job knew about the other, so the first withheld as if I would make the annual sum of my lower pay and the new job calculated withholding based on half a year of my new salary. That year sucked.

I guess it's good you have kids you can use for deductions, because otherwise, taxes are set up to reward a breadwinner/homemaker relationship. If you and your spouse are near equals, you lose.

 

The challenge here is that I MIGHT be jumping from the $10k + 25% above $74k to the $28k + 28% over $148k this year.

If I'm reading this correctly, and I eek over the line, I might be owing an $18k I did not account for.

Should bonuses hit this year, I might very well be LOSING money, or so the chart shows...?

 

Your tax at 148,850 (top of the 25% bracket) would be 28,924. Your tax at 148,851 (bottom of the 28% bracket) would be 28,925. Where would you lose money? Yes, some of your income is lost at a higher rate, but that is some of it. All the lower income was paid at lower tax rates.

 

I see what you're saying. The difference between the 10k and 28k is the tax accrued in the 25% bracket. Notice you calculate the higher tax rate on the amount over 148k instead of 73k.

There's no surprise in store for you.

 

ok