Asked in Taxes and Tax PreparationIncome TaxesTax Refunds
What can you do to lower tax when you received severance pay and a retention bonus in one year that pushed you into a much higher tax bracket than normal?
June 06, 2008 6:09PM
As it has already been done, very little. It is earnings in that year.
It is unlikely it would push you to a much "higher tax bracket", as there really are only a few brackets! (And the low one drops off at about 18K). So, while you may be paying more cash this year, your probably paying a similar percent. (Bracket rates apply only to the amounts above the lower bracket, so when reaching a 25% bracket your first 18K or so is still taxed at the low rate).
Also, if it pushes you above the FICA income ceiling (or other State payment ceilings), you actually benefit by those items dropping off.