5 ms·
this would shift my effective tax rate from 8.4% to 37.0% Do you understand the difference between marginal tax rate and overall tax rate?
by masonic 9y ago
this would shift my effective tax rate from 8.4% to 37.0%
Do you understand the difference between marginal tax rate and overall tax rate?
- throwawayjava 9y agoAs far as I can tell, parent's use of "effective tax rate" is correct (the tuition waiver is not income in any meaningful sense -- especially for phd students who aren't even taking courses). So I'm not really sure what your point is?
- masonic 9y agoAssuming his numbers were accurate, that tax rate is on each additional dollar of income, not on the total.
- mattkrause 9y agoApparently he does. I'm neither the OP nor do I know about his particular situation, but assuming a fairly generous stipend of $30,000 - Standard deduction is $6,350 - Personal exemption $4,050 x 3 (self + 2 kids) = $12,150 - Taxable income is $11,500 - Of that, it's 10% on the first $9,325 + 15% on the rest (up to $37,950), for a total of $1259. That's about 5%, not including state taxes. Now, add in $40,000 of "benefits", most of which are not actually beneficial. Taxable income is now $51,500 and the total federal tax is about $8,614, which is a pretty substantial chunk of the 30,000 actual dollars he gets. (Numbers from here: https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#53f019785701 https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs...) To make matters worse, a taxable income of $51,500 would make OP ineligible for some credits/deductions. For example, it's well past the EITC phase-out.