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[-] chemical_cutthroat@lemmy.world 251 points 1 year ago

Just in case anyone is curious about how it works...

Your entire income isn't taxed at the same rate. Each chunk of your income is taxed differently. The first 11k is taxed at 10%, the next 35k is taxed at 12%, the next 50k is taxed at 22%, and it continues on at different intervals after that. This person believed that going from 44k to 45k would then change their tax bracket and their gross income would be taxed at 22%, thus reducing their net income. This is false. Only the amount over the threshold gets taxed at the higher rate. Always take a raise if it benefits you.

[-] Iheartcheese@lemmy.world 91 points 1 year ago

This person was clearly joking. Look at their username.

[-] Frozengyro@lemmy.world 95 points 1 year ago

Still too many who don't know this, it's best to explain to everyone. I've explained it to my mother several times, and she gets it, but then conveniently forgets about that when discussing politics.

[-] TexasDrunk@lemmy.world 20 points 1 year ago

I was straight up told getting kicked into a new tax bracket would cost me money when I started working back in the 90s. By someone 3x my age. I believed it, being a wide eyed moron. I didn't figure out progressive tax rates for like a decade after.

[-] Frozengyro@lemmy.world 17 points 1 year ago

Just shitty one person could cost so many people so much opportunity in life.

[-] Hikermick@lemmy.world 19 points 1 year ago

I've heard of people who use this as an excuse to turn down overtime

[-] Frozengyro@lemmy.world 13 points 1 year ago

I've tried to explain this to coworkers who claim to want overtime, but are afraid to due to this. They either don't understand, don't believe me, or don't really want to work OT.

[-] DrPop@lemmy.world 9 points 1 year ago

As long as they filled out their w-4s right they wouldn't even have to worry. I've talked to too many people who put zero down and wonder why they owe every year.

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[-] ZombiFrancis@sh.itjust.works 14 points 1 year ago

I am surprised by the amount of professionally employed homeowning parental adults I have encountered that do not know this.

[-] Frozengyro@lemmy.world 10 points 1 year ago

It's what happens when public education is poorly funded and doesn't explain the basics with what little they do have.

[-] drislands@lemmy.world 6 points 1 year ago

It doesn't help that welfare does actually work this way.

I don't know the actual figures but my understanding is government assistance tends to work along the lines of "if you make less than $300, then the government gives you $100" so getting paid $350 is actually worse than being paid $290 for example, since going over the threshold cuts off the welfare completely.

[-] njm1314@lemmy.world 4 points 1 year ago

Hell there was even a West Wing episode where they got it wrong.

[-] Anamnesis@lemmy.world 4 points 1 year ago

That actually doesn't surprise me because the West Wing was written by rubes.

[-] RedditWanderer@lemmy.world 13 points 1 year ago

Youd be surprised at how many think a raise gives them less

[-] doingthestuff@lemmy.world 26 points 1 year ago* (last edited 1 year ago)

If they receive subsidized benefits like food stamps or quantity for free health benefits, they could lose those though. There's a reason they call it the benefit cliff. My family stayed under that line intentionally for years and when decided to take raises to get out of that cycle, things were worse for a long time.

[-] Xanis@lemmy.world 5 points 1 year ago* (last edited 1 year ago)

10k will get you over that hurdle in most cases unless it barely sneaks you over the benefits line. If you shoot past it though, go for it. Thresholds though, I know. Just don't want anyone not taking a raise due to a misread comment.

As a rule though: Stay updated on the max total assets you are allowed before benefits begin decreasing, and make sure you know what is weighted.

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[-] tate@lemmy.sdf.org 5 points 1 year ago* (last edited 1 year ago)

I'm not saying you're wrong - I completely agree with you. But I have been in the position where, if I made 10 dollars less I would have paid more than 100 dollars less in tax. That just comes from the infuriating discrete tax "tables," instead of actually calculating the tax using a continuous formula.

ETA: Apparently many here have never prepared their own tax return. Here is a sample of the tax table for 2023. The first two columns give a range of (adjusted) income, and the third is tax owed. Notice that someone who made $51,099 would pay $11 less in tax than someone who made just one dollar more. Admittedly that is less extreme that what I claimed above, but "back in the day" when I started paying taxes the tables went in much larger steps of income.

[-] TrickDacy@lemmy.world 6 points 1 year ago

If they are right, and they are, your claim makes zero sense

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[-] Evil_Shrubbery@lemm.ee 31 points 1 year ago

This legit happened to a college of mine, at his first job (as engineer), it took me well into his second year of employment (the time when he got the second yearly income tax stats) to get him to understand what I've been explaining to him since he was offered a raise a few months after he started.

I tried, I really did, with charts, examples, my own income tax statement, ... but no.

I never found out which part was bothering him, like theoretically, how tf ...

[-] Kiosade@lemmy.ca 9 points 1 year ago

Unfortunately he’s probably drinking raw milk these days. IYKYK.

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[-] Got_Bent@lemmy.world 28 points 1 year ago* (last edited 1 year ago)

I'm a tax accountant.

You'll never make less due to income tax for making more money.

You can start to get certain credits phased out and can become subject to things like the Medicare surcharge.

But it's still unlikely that making more will ever get you less.

In a similar track though, I refused raises for a couple years because my kid was in college. If I got a raise, I would be kicked into the next income tier of financial aid eligibility, and that could've been catastrophic. Those lines don't seem to phase as much as they seem to be hard cutoffs - at least as far as my kid's specific school was concerned. All of her financial aid (grants, not loans) came directly from the school, not the government.

I also was able to enjoy a little bit of education expense credit on my tax return because if it, but that part was nominal.

The biggest hit has been going from head of household with a dependent tax credit to single with fuck all credits. Fortunately, I can itemize my way into a deduction midway between single and head of household, so I got that going for me, which is nice.

Edit: Wow, that was a gibberish filled gummy induced wall of text. Nothing particularly factually incorrect, but man what a slew of non sequitur.

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[-] Zagorath@aussie.zone 26 points 1 year ago

It's comparatively unlikely, but there are circumstances where this type of thing can be true. Because income tax is not the only factor that matters. For example, you might get put on too high an income to qualify for some sort of tax rebate or welfare programme. Or you might start qualifying for an additional tax that isn't applied marginally.

As one specific example, in Australia we have the Medicare Levy Surcharge, which you pay if your income is above a certain threshold and you're above a certain age and don't have private health insurance. If those conditions are met, it applies to all your income. It's a small enough surcharge (ranging from 0% to 1.5%, with 1% and 1.25% steps in non-marginal brackets in between) that there are almost no practical circumstances that you'd actually end up worse off taking a raise, but it is at least theoretically possible.

[-] ramble81@lemm.ee 9 points 1 year ago

Yup. It’s called the “welfare (or benefits) cliff”. It tends to happen at the lower end and the. Again at the upper middle end. There are quite a few tax breaks in the US you can’t take once you pass an AGI of $160-175K. Depending on if you were taking them, a raise could technically result in less net income.

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[-] Aussiemandeus@aussie.zone 9 points 1 year ago

Yeah fucking Medicare levy.

It means I have private health and I hate the idea we are privatising our health system.

[-] Zagorath@aussie.zone 7 points 1 year ago

Just a side note, here I'm talking about the Medicare Levy Surcharge, which is actually an entirely separate thing from the Medicare Levy. That is a 2% levy that you can't get rid of by having private insurance. (But can get reduced by having very low income, or can be exempt from if you're not eligible for Medicare in the first place, e.g. if you're not a citizen.)

[-] jpeps@lemmy.world 7 points 1 year ago

Similarly in the UK going over £80k in income prevents you from claiming child benefit, and going over £100k makes you ineligible for a host of other benefits. A salary bump from 99k to 100k would be very expensive for you if had young children.

Stupidly though, a married couple each earning £99k would be able to use all benefits, but a couple where one earns £101k and the other £20k would lose out.

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[-] istanbullu@lemmy.ml 8 points 1 year ago

someone failed at teaching this loser mathematics.

[-] Tja@programming.dev 11 points 1 year ago

Check his username before you eat the onion next time.

[-] Malgas@beehaw.org 5 points 1 year ago

Way too many people don't understand how marginal tax rates work.

[-] suburban_hillbilly@lemmy.ml 5 points 1 year ago

Just went through this with my dad. He got 'right-sized' about a year ago and has been job hunting. He called me (praise jeebus) to ask me for advice about negotiating a slighly lower starting salary because his offer on a new job was about $140 over the line into the next bracket and he didn't want to 'lose' all that extra salary to taxes.

We spent about an hour on a video chat where I ended up pulling up the IRS page about it as well as going line by line through the tax tables so I could show him how it actually works. He was flabbergasted and kept asking how could every single person he knows be wrong about this.

[-] plz1@lemmy.world 4 points 1 year ago

US public education system doesn't teach anything related to real-world finances, including how tax brackets work.

[-] lightnsfw@reddthat.com 2 points 1 year ago

I learned how taxes work when I was in 8th grade and then again in high school.

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[-] akilou@sh.itjust.works 7 points 1 year ago

Hate getting bumped up into the 125% tax bracket

[-] Draedron@lemmy.dbzer0.com 5 points 1 year ago

Depending on the tax system that is an actual issue.

[-] MeaanBeaan@lemmy.world 19 points 1 year ago

At least in the US there is no possible situation where you'd get less money for making more money.

[-] Dashi@lemmy.world 7 points 1 year ago* (last edited 1 year ago)

Exactly, or that's how it was explained to me. Say you get a 10k raise from 94k to 104k and the next bracket is at 100k. If your old percent was 20% and the 100k bracket is 25% only the "extra" 4k would be taxed at 25% and the 6k before that would be 20%.

Or so I've been told by smarter people than me. Numbers/ brackets and percentages are all made up to make it easier.

Midwest, US if it matters.

[-] Fogle@lemmy.ca 6 points 1 year ago

I don't believe that's actually true. I think in the USA there are a few programs that have a hard cap on income to disqualify you. Food and housing assistance related things. I'm not American so I'm not 100% sure on them but I do think there are some scenarios

[-] Cethin@lemmy.zip 4 points 1 year ago

That's true. You'll still be making more money, but you'll also have more expenses. This doesn't apply to most people though, and for sure not ones getting a $10k raise. The progressive tax system we have only applies the tax as you progress through the levels. The first $10k will be taxed at one level, then the next bracket, then the next, etc. It's not done as one lump tax.

Different programs should be set up to slowly decrease how much you get instead of cutoff amounts. That'd remove that issue. Obviously some things are either on or off so they can't be done this way though. Ideally a lot of it should just be provided to everyone no matter what though.

[-] MeaanBeaan@lemmy.world 2 points 1 year ago

Oh yeah. That's absolutely the case for disability I believe. If you start to make a certain amount they just take away benefits. And the amount you have to make to lose benefits it's actually less money than what the benefits themselves are.

I know people personally who are affected by that situation.

Very good thing to point out and wasn't something I was thinking about. Thank you.

I guess it would be more accurate to say your paycheck from your job will never be less money due to making more money.

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[-] zzx@lemmy.world 3 points 1 year ago

Can you think of some tax systems where this is true? It's not true in the United States at least. https://en.m.wikipedia.org/wiki/Progressivity_in_United_States_income_tax

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[-] Mycatiskai@lemmy.ca 3 points 1 year ago

I took a 50% pay cut and my partner took a job that paid 10% less than her previous job but we moved somewhere that we got a 500k house on 1+ acre of land instead of our 800k townhouse, no land with one parking spot.

Sometimes less is more.

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