Please fix the tax brackets for 2023

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SilverEagle
SilverEagle Member ✭✭

When I adjust my taxable income to $89,450, the Tax Planner still states 22% (Married, filing jointly). I found other discussions here that show other tax brackets (i.e. 18%, 27%), so apparently the Quicken table associated to IRS tax brackets needs an update. Here are the tax brackets from IRS for 2023.

2023 tax brackets (for taxes due April 2024 or October 2024 with an extension)

Tax rate

Single

Head of household

Married filing jointly or qualifying widow

Married filing separately

Source: IRS

10%

$0 to $11,000

$0 to $15,700

$0 to $22,000

$0 to $11,000

12%

$11,001 to $44,725

$15,701 to $59,850

$22,001 to $89,450

$11,001 to $44,725

22%

$44,726 to $95,375

$59,851 to $95,350

$89,451 to $190,750

$44,726 to $95,375

24%

$95,376 to $182,100

$95,351 to $182,100

$190,751 to $364,200

$95,376 to $182,100

32%

$182,101 to $231,250

$182,101 to $231,250

$364,201 to $462,500

$182,101 to $231,250

35%

$231,251 to $578,125

$231,251 to $578,100

$462,501 to $693,750

$231,251 to $346,875

37%

$578,126 or more

$578,101 or more

$693,751 or more

$346,876 or more

Comments

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited November 2023
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    Which version of Quicken are you running? (Help > About Quicken)

    Is your taxable income $89,450.00-$89,450.49 or is it $89,450.50-$89,450.99? The IRS requires 0.50-0.99 to be rounded up to the next dollar. So if it is $89,450.50-$89,450.99 then the issue you might be seeing is that behind the scenes Tax Planner is rounding the total taxable income up to $89,451 which is correctly showing the 22% tax rate. But it might then also be that Tax Planner is simply dropping the cents when it shows the total taxable income of $89,450 instead of rounding it up to $89,451 like it should.

    I think in order to confirm that this might be the case you would need to manually add up all the transactions details shown in Tax Planner and manually calculate everything making sure to not drop the cents but that would be a lot of work.

    Perhaps you could instead try to fool Tax Planner by entering a dummy transaction that would reduce your taxable income by $1.00. A -$1.00 taxable income deposit to you checking account should work for this. That should drop your marginal tax rate to 12% but it should not change the amount of tax owed. If it does this then it's a pretty good indication that you are dealing with a cents rounding-up and a cents-dropped issue, not an actual tax rate table issue. If you try this, let me know what the results were.

    Regarding the "I found other discussions here that show other tax brackets (i.e. 18%, 27%)": Are you referring to this post thread?—-

    If so that thread (only 2 posts in it) is from last June and the discussion went nowhere so we really don't know what came of it. But Release R50.5 (US Versions, June 2023) did fix several tax bracket and Tax Planner issues so it might have resolved those 2 individuals' concerns. Regardless, I think it's pretty safe to assume that those tax bracket issues no longer exist (for those running R50.5 or later) because we would otherwise see a lot of other posts about this issue since then and I just am not seeing more posts about this from July/Aug to present.

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • SilverEagle
    SilverEagle Member ✭✭
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    Boatnmaniac, thank you for your response.

    I am on the latest version, R53.16.

    What I found is that if I lower the taxable income below the $89,450, I am in a new tax bracket of 20% (which does not exist). If I continue to lower it more, I can get down to the 12%, but my taxable income is now at $89,349. Along the way, I found a 15% tax bracket.

    Something is not right.

  • markus1957
    markus1957 SuperUser, Windows Beta Beta
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    I saw something like this when testing earlier in the year but not in my production file. If you provide the summary level detail of the income values in the planner and filing status, I'll try to reproduce it. I'm retired and have not seen it for my use case with just IRAs, Social Security, Pension, Interest, Dividends and Cap Gains as inputs to the Planner. A screenshot of your Tax Planner Summary screen would be a good place to start.

  • SilverEagle
    SilverEagle Member ✭✭
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    Just so I am clear, the tax bracket percentile is supposed to be the same as the Marginal Rate, correct?

  • SilverEagle
    SilverEagle Member ✭✭
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    I may have just answered my own question. Apparently, no.

    So clicking that link to see the tax rates brings me to here

    So where do I go to see what bracket I am in? When I adjust my taxable income to be below the bracket threshold, I am not seeing a significant change in my taxes returned, a few dollars, maybe. I would expect a change of ~$100-$200 based on my manual calculations.

  • markus1957
    markus1957 SuperUser, Windows Beta Beta
    edited November 2023
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    The Help article is wrong. The Marginal rate is the bracket rate for regular income and it is set for next dollar, not $1K. (Sorry, I was wrong on this. Testing shows it's not the next $1K, but the next dollar that drives the displayed rate, although you need to add $100 to actually see the rate change.)

    I played with it a little and found the bracket displayed blows up when you reach the $250K MAGI for the Net Investment Income Tax of 3.8%. It seems to be erroneously adding either 3% or 4% to the bracket rate based on some rounding calculation.

    While I have found the trigger point in a test file for when it blows up, I have not yet found out what causes it to revert to a correct bracket rate as I see in other higher income cases even when the NIIT is also triggered.

  • markus1957
    markus1957 SuperUser, Windows Beta Beta
    edited November 2023
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    After further testing I have confirmed the error condition is caused by erroneously trying to incorporate a NIIT effect on the tax bracket rate for regular income. There is no merit to showing an impact of NIIT on Salary or Other Income because it never applies to those categories of income. The NIIT only applies to investment income and it is correctly triggered in the Other Taxes and Credits section of the Tax Planner once MAGI exceeds $250K.

    Testing shows the error condition is triggered when MAGI reaches the $250K NIIT threshold. At that point the "Marginal Rate on salary" displayed deviates from the bracket rates by adding something close to the 3.8% NIIT, but not exactly. Every additional dollar added to the planner that contributes to AGI contains the erroneously added value until the sum of Salary + Other Income - Standard Deduction reaches $250K. After reaching $250K of regular taxable income the displayed "Marginal Rate on salary" reverts to the bracket rates.

    The seemingly nonsensical change in the Marginal Rate as currently deployed is just wrong. Additional Salary or Other Income never results in the NIIT being applied to that income but when the additional amount causes MAGI to exceed $250K, it will cause existing investment income to have the NIIT applied for the MAGI amount above the threshold. But to reiterate, the 3.8% is only applied to investment income and never to the Salary or Other Income. Bottom line, the "Marginal Rate on salary" should only display the applicable rate published in the IRS tax tables.

  • markus1957
    markus1957 SuperUser, Windows Beta Beta
    edited November 2023
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    I'm having second thoughts on this after further testing the scenario where Salary and Other income is low compared to investment income. I found that in all cases tested so far that the tax on "a next $100" of regular income is accurately represented by the rate displayed in "Marginal Rate on Salary". There are 2 scenarios that contribute. The NIIT as discussed above and when the 0% LTCG/QDI rate is in effect for a given income distribution. Both scenarios result in additional tax being applied to investment income as a direct result of the addition of Salary or Other income bumping the investment income into a higher tax rate bucket.

    The Tax Planner is providing accurate tax projections, so this is easy to test when you see a "Marginal Rate on Salary" that does not make intuitive sense. Make note of the tax owed with the weird rate, then add $100 of income in Salary or Other Income and note the revised tax owed. Amazingly, you will find that the difference in tax owed as a percentage of the $100 is exactly the percentage that was displayed in the original "weird" projection.

    So I'm going to retract my original assessment and apologize to the developers. The Marginal Rate on Salary provides the actual rate the next $1 ($100 in testing) of Salary or Other income will be taxed at. That is useful information, as useful and important as knowing when you cross into the next tax bracket.

This discussion has been closed.