Making More Money To Have Less Money?

[LovetheSun]

Hi everyone!

I am really confused by how taxes work. This year we made more money about $20,000 extra than 2015 but we had more expenses about $14,000 BUT I had to pay three times more taxes than last year meaning I have $2000 left but worked so much more.

Anyone experienced something similar?

[Cat Herder]

"Taxpayers fall into one of 7 brackets, depending on their taxable income: 10%, 15%, 25%, 28%, 33%, 35% or 39.6%."

http://www.bankrate.com/finance/taxes/tax-brackets.aspx

[TomCopeland]

taxes

Hi everyone!

I am really confused by how taxes work. This year we made more money about $20,000 extra than 2015 but we had more expenses about $14,000 BUT I had to pay three times more taxes than last year meaning I have $2000 left but worked so much more.

Anyone experienced something similar?

It's hard to respond effectively without knowing more about your situation. As your income goes up, your taxes go up. It could be that you were kicked into a higher tax bracket and that means some of your income was taxed at a higher rate. It could be that you were no longer eligible for some tax credits. With $20,000 more in income and $14,000 more in expenses, that's a $6,000 increase in your profit. If your taxes were 40% (federal and state), that means you paid $2,400 more in taxes. That doesn't account for the $2,000 you say you have left over after taxes, but it starts to come close.