USA What to claim? (got a raise but higher tax bracket)

[Jack720]

Hi,

I'm married, we file jointly, and the only source of income (W2 employee).

We have 4 kids, all young and all live with us.

I was making $80k a year in Boise Idaho and got a raise (yay). The raise is to $100k (yay), but now this will mostly be eaten by taxes each month (it seems). I was claiming 11 withholding based on what someone suggested.

So my questions:

1. What should I claim?
2. Any way to keep more of this raise in my pocket each month?

 

[kirby]

https://apps.irs.gov/app/tax-withholding-estimator

1. The above is from IRS. It will estimate what you should claim
2. No, unless you underwithhold on purpose, which is not a good idea

 

[Jack720]

I heard those IRS calculators are crap? No?

 

[kirby]

Turbotax website would be better. But their calculator site is under maintenance so they direct you to the IRS site. A port in the storm at best.

 

[Werner Reisacher]

First of all, congratulations.
You are right. Earning extra money can push you into a higher tax bracket, and that extra money will be taxed at the rate applicable in that bracket. This does however not affect all of your income. There is a difference between the marginal tax rate (the rate applicable for each bracket) and the effective tax rate which is the total of all taxes due, calculated on the income in each tax bracket at those marginal tax rates. Therefore, at your income level, it is safe to assume that you are ahead of the game unless the marginal rate in your highest bracket exceeds 100%.

 

[kirby]

Highest possible marginal rate for 2020 is 37%. Why are you discussing "unless the marginal rate in your highest bracket exceeds 100% ? That means then you would pay more in tax than what you earned. Please explain.

 

[Werner Reisacher]

Kirby, I should have been more careful with the selection of my words. With the words "Ahead of the game" I meant, receiving more money is still in your advantage since not all of it is eaten up by taxes.