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Author: Polywilliams Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121114  
Subject: Penalty for reaching next tax bracket? Date: 3/22/2007 4:09 PM
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Hello. I am still trying to get a grasp on how much money I want to earn this year--or rather how many hours, if any, I want to work once I hit a highly taxed bracket.

In weighing the incentive not to work once the higher bracket kicks in, I was looking to see where that line is by checking the brackets.

http://www.irs.gov/formspubs/article/0,,id=150856,00.html

It appears that if I earn enough to push my income over $61,300, I would be immediately penalized to the tune of around $7000 on that very next dollar with the tax jumping from $1510 plus 15% to $8440 plus 25%. This according to the Married/joint table.

This makes it seem as if earning $61,299 is considerably more profitable (and easier time-wise) than earning $61,300. Since I am 'in the neighborhood' of the $61,300 figure after adjustments (taxable income), would it be wise to plan to come in just under that bar?

I ask because there are experts here and this makes little sense to me. Can I really make a better salary by NOT working if I am near that line in the sand?

PW
really doesn't want to have to earn several thousand dollars to net one extra dollar once I get into that bracket. Someone correct my understanding of this and earn a lot of recs! ;)
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