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Old 11-13-2017, 06:25 AM   #1
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Default Tax implications for signing bonus

So I'm looking at about a $40K signing bonus.

1. Looking at deferring class from mid December 2017 to mid January 2018 for tax purposes as that would put us in the top tax bracket for 2017 (wife works as well). Thoughts?
2. Signing bonus comes with a two-year prorated contract. My intent is to just invest the signing bonus and sit on it. If I make it to a major prior to the two years, give back what I owe. If I do need to pay back part of the signing bonus, how do I figure that for taxes? File an amended return?

Thanks.
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Old 11-13-2017, 08:22 AM   #2
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I would not defer the class over a small tax difference. You might also ask if they will defer paying the bonus until 1 Jan. Might take them that long anyway. If it delays you getting to a major by a month you will lose more than any tax difference.
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Old 11-13-2017, 11:40 AM   #3
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Quote:
Originally Posted by sailingfun View Post
I would not defer the class over a small tax difference. You might also ask if they will defer paying the bonus until 1 Jan. Might take them that long anyway. If it delays you getting to a major by a month you will lose more than any tax difference.
They can't defer it. The bonus must be paid prior to signing in on property as once you are on property you fall under the CBA. Also, I would be giving up a bonus (though only a few thousand dollars), paid on 1 Jan at my current airline.
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Old 11-13-2017, 05:24 PM   #4
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Quote:
Originally Posted by Blackhawk View Post
So I'm looking at about a $40K signing bonus.

1. Looking at deferring class from mid December 2017 to mid January 2018 for tax purposes as that would put us in the top tax bracket for 2017 (wife works as well). Thoughts?
2. Signing bonus comes with a two-year prorated contract. My intent is to just invest the signing bonus and sit on it. If I make it to a major prior to the two years, give back what I owe. If I do need to pay back part of the signing bonus, how do I figure that for taxes? File an amended return?

Thanks.
Let's say you're at the top of the 35% tax bracket: making exactly $470,700, married and filing jointly. The difference between the top tax bracket and the 35% tax bracket is 4.6%. On a $40,000 bonus, that's a $1,840 "penalty" for accepting the bonus this year, instead of possibly accepting it next year, when your income may be lower (which it sounds like you expect).

It's not correct that it "puts [you] in the top tax bracket for 2017." It puts every dollar you make above $470,700 in the top tax bracket. It's confusing. It's irritating to calculate. But that's how it works. This is "progressive" taxation.

Here's a good reference for the tax treatment of a repaid signing bonus: https://ttlc.intuit.com/questions/26...-2014-tax-year
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Old 11-14-2017, 07:13 PM   #5
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The new tax proposal looks like a bad deal for many making over $130k household per year. Personally I'd take the income in 2017 rather than risk it being worse in '18. Either way, the extra tax one year or the other isn't worth deferring a class.
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