Quote:
Originally Posted by Saul Good
This isn't even close to accurate.
Your earnings aren't taxed at your highest marginal bracket from dollar one. If you earn $150,000 and don't claim any deductions, your total Federal burden is 20.16% or $30,244 (assuming married, filing jointly). You would be left with $120,000 not counting state and local taxes. Even after factoring in state and local, you are still left with over $100,000. Again, that is without taking ANY deductions.
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Actually you might be surprised and no I was not accounting for married I was using single rates.
CA has a top state tax rate of 9.3% + 1.2% for CA state disability insurance(tax). The CA disability phases out around 95K
State bracket
0-~7K 1%
7K-~17K 2%
17K-~27K 4%
27K-~37K 6%
37k-~47K 8%
>47K 9.3% (ok it's 10.3 for over 1million but that's not relevant here)
FICA caps at 106,800 at 6.2% and Medicare tax is 1.45 with no cap
Fed single bracket
0-~8K 10%
8K-~34K 15%
34K-82K 25%
82K+ 28%(assuming we are dealing with numbers under 171K)
at 150K you'd owe
CA state 70+200+400+600+800+9579 = 11649
CA disability(since you hit cap) = 1140
FICA = 6622
Medicare = 2175
Federal = 800 + 3900 + 12000 + 19040 = 35740
Total 11649 + 1140 + 6622 + 2175 + 35740 = 57326
57326/150000 = an effective tax rate of ~38% So you're right I did overestimate the effective tax by ~2% or ~$3000. While deductions will help lower that some, most high incomer earners lose the state tax deduction because CA's high income tax rate forces them into AMT. Which is the most F'd up part of AMT. I can't be avoiding taxes by paying state tax......