Bonus puts me in new tax bracket?

Question

My husband and I just discovered that my $3000 bonus will put us into a new tax bracket that effectively forces us to pay $6000 more in taxes. What should I do? Refuse the bonus? Find some other deductions?

Answer 1

how about getting a 401k at work? Or opening and IRA account?

Answer 2

This isn't possible that getting pushed into a higher bracket costs you more than the extra income is. If you go into a new bracket, only the amount above the new bracket limit is taxed at a higher rate. Since the highest tax rate is 35% (and you have to be making hundreds of thousands of dollars to be there), the most you could pay extra on $3000 is about $1050. The taxes on your income before the bonus would still be in the same bracket they were.

If the additional amount makes you ineligible for some credits, a difference of $3000 in income would not have this much effect. If you're getting the EIC, it could reduce it by hundreds, but not thousands, of dollars.

Whoever told you that getting the $3000 additional income would cost you $6000 more in taxes doesn't sound like they have their facts straight. If you are calculating the taxes yourself, check your calculation again, sounds like you have an error someplace.

If you still think this is true, please post more details so people can try to help you.

Answer 3

What you fear isn't possible. Take the money. If you don't need the money and qualify for a traditional IRA, then funding the IRA with the bonus, you will keep the bonus and not raise your taxes.

If you were at the absolute top of the 15% bracket and all the bonus is in the 25% bracket, then the additional tax owed is $750.

The top tax bracket is 35%, so at the very most your additional taxes are $1050 (and that is if you already make over $300,000).

Answer 4

That is not how US tax brackets work. Only the income in excess of the new tax bracket is taxed at the higher rate. income below the cutoff is still taxed at the lower rate. A $3000 bonus can't increase your taxes by $6000, unless your new tax bracket is 200%.

Answer 5

Don't worry, we have a graduated tax system. You first $xxx is taxed at 15%, then any money over $xxx, but less than $yyy is at 20%, then any money over $yyy is at 25% (all made up numbers). So there is no way that your bonus will cost you $6000 in tax. Just take the bonus. The highest US tax rate is 35%, so the most you could owe in more federal tax is $1050.

Answer 6

do not problem about the better tax bracket. once you enter a clean tax bracket, in effortless words the income in that bracket is taxed on the better fee, not all of your income. social gathering, enable's say your taxable income is $80,000, putting you interior the 25% tax bracket (for unmarried). the subsequent tax bracket is 28% which starts at income over $80 3,six hundred. enable's say your boss resources a $5,000 bonus, making your taxable income $80 5,000. in effortless words $1400 is taxed on the 28% fee.

Answer 7

congratulations on the bonus.
now stop thinkin like poor folks.
take the money open an IRA for your self , fund it to the max, open one for your husband fund it to max. you can take 8000$ off your income.
change CPAs if they think 3000$ increase in income will cost you 6000$ in taxes . you need new one.
never refuse a bonus doing so will bite you in rears.
never take gift cards (Kristy idea) still reported as income and have bad clauses in them.

Answer 8

It is impossible for a $3000 bonus to make you pay $6000 more in taxes.

Can't happen

Answer 9

Put it in an IRA. And try to find all of the deductions you can.

Answer 10

Ask them to give you gift cards or Visa/American Express cash instead of cash or a check.