Quote:
Originally Posted by Yoshoobaroo
Yea sadly A LOT of people don’t understand that you only get taxed the higher rate on income in excess of the previous bracket. The amount of times I’ve had to explain this to otherwise very smart people, people that own their own business even, is baffling.
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I have the same problem when I tell people we have no mortgage. "WHAT! But what about the tax deduction!". They don't seem to get that depending on your top tax bracket, you are sending a lot more money to the bank to get an amount equal to your tax bracket back from the government and the lower your bracket the less you get back.
Or, I'll donate the money to a better cause than a bank and get the same deduction, well at least that used to work. Not so much under the current tax law.
Sometimes I literally have to use 4 quarters to demonstrate.
"So, in my situation, I have to send $0.25 to the government" putting that in their hand. "Now I have $0.75". "Or, I could send the entire amount to the bank" putting the $1.00 in their hand "and the government will send me $0.25 while the bank keeps the rest" taking back one quarter.
Even after that, there are some people don't seem to get it.
It's primarily because most people don't understand the difference between a tax credit and a tax deduction.