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Old 06-03-2015, 02:50 PM
 
166 posts, read 257,876 times
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You're so broke making only $80K a year? Step your game up. You'll need to live with your parents for a while. Maybe when you grow up and start making $150K a year you'll be able to have your own place. Until then, good luck getting a girlfriend or friends period. No one likes to hang with broke bums.
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Old 06-03-2015, 04:06 PM
 
Location: River North, Chicago, Illinois
4,620 posts, read 8,114,586 times
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Quote:
Originally Posted by Larry Siegel View Post
Well, some people do. It's the exception, not the rule. A good-school MBA working in asset management, hedge funds, private equity, private banking can make $200K after five years, though.

*Make* $200K, not *clear* it. The taxman takes almost half.
Taxman doesn't even take close to half in Chicago.

Even for a single person who didn't itemize and didn't contribute a cent to a 401(k) or any other pre-tax earnings, for people in Chicago earning exactly $200,000 as salary and/or bonus, the worst case scenario is basically just over about $65k in taxes. So, basically, 1/3 of your $200k per year. That tax amount would also be higher in New York City and a number of other states where the state income tax is higher, but in Chicago it would be about 1/3.

$47,812 in Federal income tax
$7,444 in Illinois income tax
$7,254 in Social Security tax
$2,900 in Medicare tax

Those numbers are basically worst case. They would be lower if you had a spouse who earned less than you and you filed jointly, they would be lower if you contributed to a 401(k), they would be lower if you had a home mortgage where the interest was higher than the standard deduction or if you could itemize for other reasons and end up higher than the standard deduction. It could also be lower if the $200,000 was earned from something other than salary and bonus.

Now, for a *second* $200,000, you'd end up paying $76,400 in taxes, but that's about a 38% marginal rate, which I don't consider to be very close to "half."

For the curious, for residents of New York City, the total tax rate would be about 6% higher in both examples, so a total bill of $77k for the first $200k and about $88k on a second $200k. $88k on $200k does start to be "close to half" in my book.

Last edited by emathias; 06-03-2015 at 04:15 PM..
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Old 06-03-2015, 05:18 PM
 
Location: Upper West Side, Manhattan, NYC
15,331 posts, read 23,757,300 times
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Quote:
Originally Posted by emathias View Post
That tax amount would also be higher in New York City and a number of other states where the state income tax is higher, but in Chicago it would be about 1/3.
Yes. At $200K/year, NYC would take out 6.65% for the state and another 3.65% for the city versus 3% for Chicago (total of 10.3% versus 3%). So in other words, you get taxed almost $15,000 more per year in NYC than Chicago at that salary.
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Old 06-03-2015, 07:17 PM
 
25 posts, read 42,449 times
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Originally Posted by marothisu View Post
Yes. At $200K/year, NYC would take out 6.65% for the state and another 3.65% for the city versus 3% for Chicago (total of 10.3% versus 3%). So in other words, you get taxed almost $15,000 more per year in NYC than Chicago at that salary.
I thought IL state income tax was 5%?
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Old 06-03-2015, 08:15 PM
 
Location: Upper West Side, Manhattan, NYC
15,331 posts, read 23,757,300 times
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Originally Posted by Fishroll23 View Post
I thought IL state income tax was 5%?
Sorry, it's 3.75%. It was reduced by 25% to start the year.

Illinois income tax rate falls by 25 percent Jan. 1 - Chicago Tribune
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Old 06-03-2015, 10:07 PM
 
25 posts, read 42,449 times
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Originally Posted by marothisu View Post
Sorry, it's 3.75%. It was reduced by 25% to start the year.

Illinois income tax rate falls by 25 percent Jan. 1 - Chicago Tribune
Nice!
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Old 06-04-2015, 08:36 PM
 
6,439 posts, read 6,867,397 times
Reputation: 8739
Quote:
Originally Posted by emathias View Post
Taxman doesn't even take close to half in Chicago...
Your analysis is correct. Most people are also responsible for some health insurance premiums taken out of the paycheck, and contribute to a 401(k), so the paycheck can be half of income but the *taxman* is not the reason for the entire half.
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Old 06-05-2015, 01:32 PM
 
Location: River North, Chicago, Illinois
4,620 posts, read 8,114,586 times
Reputation: 6321
Quote:
Originally Posted by Larry Siegel View Post
Your analysis is correct. Most people are also responsible for some health insurance premiums taken out of the paycheck, and contribute to a 401(k), so the paycheck can be half of income but the *taxman* is not the reason for the entire half.
Fair enough, although in the kinds of jobs that pay $200k/year the employee probably doesn't have to pay that much toward insurance, especially proportionate to the salary. Where I work, I think the most expensive plan for a family would require a contribution of about $400 per month, so about 2.5% of a $200k salary. But anyone getting that one would likely have at least three dependents, and if one of those was a stay-at-home mom, the tax savings of that scenario probably cover the insurance payments if they planned ahead with their W4. Assuming they're under 50, a maxed-out 8.75% contribution to the 401k would become 6% less take-home pay. So if the family situation offset the cost of insurance via tax deductions, and the employee contributed 8.75% (which is more than most people do) toward their 401k, then their net deposited into their bank each month would be about 61% of the top-line salary number. And with almost 9% of their salary going to a 401k, they'd be essentially keeping 70% of their top-line salary, even though some would be deferred (the 401k).

Other things commonly deducted tend to be small potatoes, and likely wouldn't add up to even 1% of salary.
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