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Marginal Bracket Percentage in Scenario Analysis

I don't understand the Marginal Bracket Percentage Shown in Scenario Analysis.

WHERE DOES THE MARGINAL TAX NUMBER COME FROM?

It is NOT as simple as taking the Taxable Income and plugging that into the marginal tax table!

This is the marginal rate at which the next $1 of ordinary income will be taxed. Taxable income often includes items that are taxed at different rates, such as Long Term Capital Gains or Qualified Dividends. To determine the marginal tax bracket for ordinary income, these other sources of income must be backed out.

The rate at which capital gains and qualified dividends are taxed is based on the taxpayer's taxable income.


The marginal percentage for both ordinary income and capital gains references the marginal bracket at which the client's next $1 of ordinary or qualified income is taxed at. To see a more detailed explanation for each rate, click the "question mark" help icon next to the rate in question.  


marginal1-1



Our article linked HERE details how this plays out on the Tax Report as well.