ok... i put 100,000 into my savings.. bank gives me a 3% interest rate. end of the year i accumulated 2,672.18. i was informed that we had to pay taxes on the interest gain. if so how much tax is taken and why? and if i have more money would i have to pay more taxes becuase of being in a new tax bracket? lets say lik 500,000 dollars?
2007-09-06 09:04:07 · 8 answers · asked by big H 4 in Business & Finance ➔ Taxes ➔ United States
reply to gem- yea i heard inheritance get taxed really high. like you said to 50%. anyways i guess it does depend on tax bracket and AGI. i was tryin to figure out the percent taken lik 15% or something like that?...
2007-09-06 09:24:53 · update #1
The amount of interest earned will be factored into your income to reach your adjusted gross income (AGI). Your tax burden is based on your AGI. The percentage varies at different levels, so the amount of tax you will pay in the interest will depend on your tax bracket.
2007-09-06 09:12:26 · answer #1 · answered by ty97 2 · 0⤊ 0⤋
The interest you made is added to your other income, and tax is calculated on the total. The extra taxes due to the interest are the same as if you had made that much more in your paycheck. If you made more interest,you would pay more tax since you'd have more income, even if the extra wasn't enough to go into the next tax bracket.
2007-09-06 13:24:16 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
First, if you have $100,000, you should be able to get a much higher interest rate than 3%. If this bank will not give you one, then move the money elsewhere. Currently, you should be able to get between 5% and 6%.
Second, if you do not wish to pay taxes on the interest, you can invest the money in municipal bonds, which are exempt from federal income tax.
2007-09-06 12:19:16 · answer #3 · answered by StephenWeinstein 7 · 1⤊ 0⤋
Interest is taxed as ordinary income at your marginal rate. Why? Because that's the law. If you're close to the next bracket it could put you into a higher bracket, however only the amount over the bracket is taxed at the higher rate.
2007-09-06 09:55:08 · answer #4 · answered by Bostonian In MO 7 · 3⤊ 0⤋
I am a savings bank account holder in SBI. during FY-2014-15 bank income tax. Bank send me Rs. 100000 as income and deducted Rs.10787 as TDS. Should I show Rs. 100000 in "Income form other sources" ?
2015-06-27 17:45:37 · answer #5 · answered by rajesh 1 · 0⤊ 0⤋
yes tax on interest only. yes increase in bracket if the 2k+ puts you in a different bracket
You should consider putting your money in tax shelter such as retirement plans or realestate. $100K is way too much to sit in bank anyway
2007-09-06 09:27:59 · answer #6 · answered by mrrosema 5 · 0⤊ 0⤋
Yep, it's the American way.
The interest is added to your other income to arrive at your adjusted gross income which determines your tax rate.
And just think, if you continue doing so well and do not set up a trust, your future inheritors will be able to pay tax again, up to 50%!
Our tax structure and spend, spend spend government really make me angry.
2007-09-06 09:12:51 · answer #7 · answered by Gem 7 · 1⤊ 2⤋
It's taxed because it's income. All income is taxable.
Interest income is considered passive income.
What you earn at work is not passive income.
2007-09-06 09:12:12 · answer #8 · answered by Unsub29 7 · 0⤊ 2⤋