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EDIT I incorrectly multiplied the tax rate to the salary difference, and said that this was a 5$ difference. This is totally wrong (as multiple people point ou
by ammon 10y ago
EDIT
I incorrectly multiplied the tax rate to the salary difference, and said that this was a 5$ difference. This is totally wrong (as multiple people point out below). I'll leave my original embarrassing comment as a cation to not write stupid things :)
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I just added in a mention of the tax difference. But the numbers are 13.3% in CA vs 0% in WA. That's significant, for sure. But 13% tax on $33k is about $5k. I don't think that changes the conclusion that the salary difference does (in many cases) cover the housing costs.
You're likely correct about the price for a similarly sized home. People who want large homes should probably not move to the Bay Area.
- harterrt 10y agoThanks for adding the note on the tax difference! That doesn't address my point though. If the salary difference of $33k is the difference between gross salary, that $33k is going to be taxed at the marginal tax rate. My guess at a marginal tax rate would be ~40%. Accordingly, that $33k becomes closer to $20k after tax. Edit: to clarify, consider a Seattle salary of $100k and a Bay Area salary of $133k. The take-home salary for each location would be: Seattle : $100k*(1-0.4) = $60k Bay Area: $130k*(1-0.4) = $78k Leaving $19.8k in additional income to cover the median rent increase of $18k annually.
- serge2k 10y ago> My guess at a marginal tax rate would be ~40%. Sounds high for Seattle.
- brotherjerky 10y agoWashington state has no state income tax, which in California is a little under 10%: https://www.tax-brackets.org/californiataxtable https://www.tax-brackets.org/californiataxtable Works out to $9k according to this for a single filer: https://smartasset.com/taxes/california-tax-calculator#8TRRj8YaEI https://smartasset.com/taxes/california-tax-calculator#8TRRj... -- so your additional income is more like $11k, or just under $1k / mo. In my experience, the difference in housing is far more than $1k/mo, so you come out ahead in Seattle. EDIT: Looks like I forgot about California's other taxes on payroll, so it's actually even more in Seattle's favor.
- baccheion 10y agoThere are take-home salary calculators online (know about the variations by state) if you want to get that "into it."
- jrm415 10y agoIf you move to CA, you need to pay state tax on your entire earnings, not just your raise. 13.3% of 140k is more than 18k, which is certainly significant.
- ammon 10y agoYou're totally correct and I am wrong :)
- wwweston 10y agoWait -- is the assertion here that California state tax rates aren't marginal? Because I don't think that's true.
- jrm415 10y agoCA taxes are marginal. My math was overly simplistic, because I only wanted to illustrate that you needed to pay CA taxes on your full salary.
- snovv_crash 10y agoThe difference is that WA doesn't have state income tax.
- EdJiang 10y agoI believe you can deduct state from federal tax, which would save ~2.5% in marginal tax. In addition, social security phases out at ~120k so that's another 7.5% savings. So the difference is almost a wash if I understand correctly?
- seattlefreeze 10y agoDon't forget about AMT. That usually throws a wrench in things. https://en.wikipedia.org/wiki/Alternative_minimum_tax https://en.wikipedia.org/wiki/Alternative_minimum_tax
- valleyer 10y ago
- mrkurt 10y agoHa, getting taxes wrong isn't stupid. It's a sign that taxes are complicated. :)
- bcheung 10y agoTaxes can be complicated but tax brackets aren't a complicated concept. Especially for programmers. Not understanding and planning around taxes is extremely unwise and inefficient. If you understand taxes and finances you can cut another 10-20 years off your working life.
- cookiecaper 10y agoYou should write a primer. A lot of programmers get into the game pretty young and figure they'll deal with all of the financial planning stuff when they're older.
- benmaraschino 10y agoOne nitpick: the 13.3% bracket only applies to taxable income of >$1M/year. The marginal rate that actually applies to most of the numbers being thrown around is 9.3%, which corresponds to the 51-263K bracket if filing a single return (103-526K if married filing jointly or HOH) - plus you can deduct these taxes on your federal return, to boot. https://www.tax-brackets.org/californiataxtable https://www.tax-brackets.org/californiataxtable
- bcheung 10y agoWhere are you getting 13.3%? Most likely a software developer is going to be in the 9.3% bracket. And it is also a graduated bracket system so you are only paying that 9.3% on income over $51K. See https://smartasset.com/taxes/california-tax-calculator https://smartasset.com/taxes/california-tax-calculator On a $150K income you are going to be paying an effective rate for CA around 7%.
- linkregister 10y agoYou're omitting MediCal. It ends up being about 13% (marginal) after it is added.
- mercutio2 10y ago13.3% is the marginal tax for people making over $1 million/year in CA. People in that income bracket are not worrying about whether they should move to the Bay Area.
- bcheung 10y agoAre you referring to CA OASDI/EE? Not sure what MediCal is. You mean Medicare? That's federal. CA OASDI/EE is 0.9% but you only pay it on the first $100K or so.
- harterrt 10y agoFor clarity, I wrote up my thoughts here [0]. The issue I pointed out applies to Federal as well as State taxes. By my calculations, it looks like it's clearly not worth it to move to the Bay Area. [0] http://blog.harterrt.com/is-moving-to-the-bay-area-worth-it.html http://blog.harterrt.com/is-moving-to-the-bay-area-worth-it....