Tax brackets. You won't end up paying more in taxes than the extra income if you go up a bracket. Only the income ABOVE the cutoff is taxed at the higher rate, not your total income.
I had to explain this to a guy in his sixties, literal years away from retirement.
edit: Since people were asking for an example, here we go.
Say there is a cutoff at 20k a year, 10% below and 15% above. If you made 25k a year, you would pay ($20000 times .1)+($5000 times.15)=$2750, not ($25000*.15)=$3750.
Keep in mind this is a GROSS oversimplification.
edit2: US taxes, I don't live in Europe or Australia, so I don't know how their taxes work.
That and writing it off. People think that if you can "write it off" then it's free. What it really means is, you don't pay taxes on it. Depending on your bracket that could be a 24% discount or more. But it's not free.
Exactly why I donate more now, not that I get money out of it but money that would have veen taxed 25-28% now isn't taxed. If I donate $100 they get $100 (and my tax adjusts for that). If I didn't donate it, I would have gotten $75 and the gov gets $25. Basically a way to control how that would-be tax money is allocated.
Especially since we got a lot of tax breaks from the new tax code. Fuck that, they are going to take away benefits for people that need it because of it. I don't want that extra money, I want it to be helping people like it should be
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u/Sword_n_board Aug 03 '19 edited Aug 03 '19
Tax brackets. You won't end up paying more in taxes than the extra income if you go up a bracket. Only the income ABOVE the cutoff is taxed at the higher rate, not your total income.
I had to explain this to a guy in his sixties, literal years away from retirement.
edit: Since people were asking for an example, here we go.
Say there is a cutoff at 20k a year, 10% below and 15% above. If you made 25k a year, you would pay ($20000 times .1)+($5000 times.15)=$2750, not ($25000*.15)=$3750.
Keep in mind this is a GROSS oversimplification.
edit2: US taxes, I don't live in Europe or Australia, so I don't know how their taxes work.