I agree that marginal rate is the important measure; the effective rate comment was an aside. Unless the AGI was low enough that whole liability is eaten up by non-refundable credits, because then tax bracket is not particularly relevant. . But with just the CTC, that is not likely. Also, if they are in any phaseout ranges, marginal rate does not equal the tax bracket.
For instance, if OPs AGI hits $160k when a couple kids are in college, the marginal tax rate goes up very quickly. And unlike the tax bracket, that $160k (for the AOTC) is not tax inflation adjusted.
Having taxable investments throw off income that throws you into a phaseout range can be detrimental, and it’s not perfectly offset by tax deductible interest (even if it’s all above the standard deduction) and would reason to avoid taxable interest offset by tax deductible interest.
For instance, if OPs AGI hits $160k when a couple kids are in college, the marginal tax rate goes up very quickly. And unlike the tax bracket, that $160k (for the AOTC) is not tax inflation adjusted.
Having taxable investments throw off income that throws you into a phaseout range can be detrimental, and it’s not perfectly offset by tax deductible interest (even if it’s all above the standard deduction) and would reason to avoid taxable interest offset by tax deductible interest.
Statistics: Posted by queenofthemadhouse — Sun Nov 03, 2024 12:03 am — Replies 15 — Views 1500