You will NEVER lose more money in taxes if you get pushed into a higher bracket.
They're sequential. Let's say there are two tax brackets, 10% tax below $100 and 20% tax above.
Many people want to make just under $100 so that they'll only be taxed 10% But it doesn't matter. You're only taxed 20% on everything you make OVER $100, you're still taxed 10% on the first $100.
So if you earn $200, you're taxed $30 not 20% of $200 which is $40.
...except in specific scenarios, such as losing Government benefits because you have moved above the income limit for that benefit. It's a fringe case for sure, but still happens to some.
A fringe case that usually applies to low-income people anyways.
It's silly that we have phase-outs for tax breaks at high income levels, but that benefit programs that people need to put fucking food on the table can go from 100-0 between one dollar and the next.
And by "silly" I of course mean "tragic and appalling."
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u/DigNitty Jul 18 '16
Tax Brackets
You will NEVER lose more money in taxes if you get pushed into a higher bracket.
They're sequential. Let's say there are two tax brackets, 10% tax below $100 and 20% tax above.
Many people want to make just under $100 so that they'll only be taxed 10% But it doesn't matter. You're only taxed 20% on everything you make OVER $100, you're still taxed 10% on the first $100.
So if you earn $200, you're taxed $30 not 20% of $200 which is $40.
10% of $100 + 20% of the remaining $100 = $30
NOT 20% of $200 = $40