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I'm well aware of the difference between withholding and tax liability. Fwiw 250k mfj taking the standard deduction is roughly 20.5% effective not taking into account 401k contributions, state income tax as a deduction etc maxing 2 401ks drops the effective rate under 17%
Yes, you may well be but many others are not. I did not intend to say that you yourself were unaware of this. My effective tax rate at $250k was about 22%, as a single. A surprising number of people confuse marginal and effective rates, as you are, no doubt, also aware. I deleted my post because I probably should have addressed another poster.
Last edited by Achelois; 02-01-2016 at 06:07 PM..
Reason: Typos will be my undoing.
I'm sure you do think I am better off having a higher income and paying taxes on it so you can get a refund when you paid absolutely NO federal tax into the system.
Are you kidding?
You ARE better off having a higher income and paying taxes on it. Of course you are.
If you would be better off with such a low income that you didn't have to pay federal income tax, why don't you? I'm mean that seriously. The answer, of course, is that you're better off making more money.
This is not a difficult concept, people.
A few years ago, thanks to an unexpectedly large bonus and some raises/promotions that came mid-year, we owed--OWED--$100K at tax time. It was shocking to pay such a large amount, but you know what? HAVING THE MEANS TO PAY IT was MUCH better than not making that money all. Without question.
My husband thought for sure we'd be getting a fat refund like the $13,000 we got last year. But then I got promoted, and apparently being bumped into the next bracket (both me and us jointly) somehow changed everything.
I seriously feel like I actually took home more when I earned less money. Lol. So much for working hard to get that promotion and working 50+ hours a week ever since.
I hear this all the time. You do understand that moving to the next tax bracket doesn't tax ALL your money at the higher rate, just any money over that breakpoint, right? So if your AGI was $1000 into the next tax bracket, you would only pay the higher rate on that $1000. So many people don't understand this concept.
So if you're in the 15% bracket (using me for an example) and your effective federal tax rate was 8% (like mine was last year with no deductions other than the standard), and you moved barely into the next bracket, your effective rate might be 8.1% or 8.2%, but it isn't going to suddenly jump to 14%, where you net less than if you hadn't moved up a bracket.
Mathematically, there is no point at which moving into a higher bracket nets you less money. More money gross always = more money net, at least from a federal tax rate viewpoint.
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