The New 50% Tax Bracket
It looks like the Senate will amend the next round of Covid relief legislation so that EIP#3 will be phased out for incomes between $75K and $80K ($150K and $160K for MFJ) instead of a cap of $100K/$200K.
This means that someone with AGI of $75K will receive $1,400, but another $5K income will reduce that to zero. That amounts to a 28% tax rate on the extra $5K. They’re probably already in a 22% tax bracket, so the effective rate is 50%.
Anyone else remember the days of “maximum tax on earned income,” of 50%?
I'm not sure how this would work for someone with two dependents, who would receive $4,200 with an AGI of $75K and is not eligible for Head of Household (which has a higher allowance). If the payment for dependents is capped at $80K also, they would be in a 106% bracket.
