4 ms·
You don't understand how tax brackets work. You never make less money by moving up a bracket. The bracket rate only applies to income within the bracket.
by TimPC 2y ago
You don't understand how tax brackets work. You never make less money by moving up a bracket. The bracket rate only applies to income within the bracket.
- medvezhenok 2y agoThe more correct statement is "you never pay more in taxes by moving up a bracket" - though even that is not correct in all cases. There are a lot of things (IETC for example, or benefits, or health insurance) which have $ cutoffs. Or tax breaks (i.e. electric vehicle credit) that only apply below a certain income. Exceeding those fixed points can certainly make you make less money. One thing I ran into recently was fiscal incentives for homeownership (though not directly related to taxes) - there is a cutoff at a certain income level where if you stay below it you get a $10K credit towards closing costs. The tax code is full of things like that.
- reaperman 2y ago*EITC (nit)
- smsm42 2y agoTaking into account only the federal income tax brackets, this is true. But tax cliffs exist, e.g. see: https://smartasset.com/financial-advisor/tax-cliff https://smartasset.com/financial-advisor/tax-cliff so accounting for all taxes and other factors, there could be a situation where you earn more pre-tax, but end up with less after all is accounted for. For most high-earners it's less relevant as they are past of the most cliffs anyway, but sometimes things like losing access to IRA deductions may be a factor too.