5 ms·
Tech stock is taxed at around 50% when you get it and then 20% of the upswing. So $475k total comp is more like $250k in your bank account in practice.
by vjeux 5y ago
Tech stock is taxed at around 50% when you get it and then 20% of the upswing. So $475k total comp is more like $250k in your bank account in practice.
- lotsofpulp 5y agoIf you are going to include the tax rate on the capital gains, then you should include the capital gains in the amount in your bank account. You should also hire a CPA or at least spend some time reading about strategies to minimize taxes if you are paying close to an effective 50% income tax on $500k of income.
- d23 5y agoDo you have any resources you can share? My understanding is it’s pretty difficult to lower your taxes meaningfully if all of it comes from wages.
- lotsofpulp 5y agoBogleheads forums or whitecoatinvestor. Even just 401k, HSA, 529, and megabackdoor roth should help bring down effective tax rate (for the $500k income being discussed). You will not get as low as someone with their own business or S corp, but the tax advantaged savings account should help.
- mupuff1234 5y ago529 and megabackdoor are post tax so they won't affect the tax on the 500k (but are nonetheless useful tax planning tools)
- lotsofpulp 5y agoTrue, I guess my mental model is to amortizing the total taxes over the total income/investment period.
- vecinu 5y agoHSA contributions and gains are taxable in California, so that won't help your taxes.
- vjeux 5y agoYou are right, I should be more precise. If you earn more than $523,600 and are single, then your tax rate is not 50% but 37%, which is still meaningful amount that is often not considered when looking at those big numbers. https://www.manafld.com/blog/2021/2/26/rsus-no-sell-tax https://www.manafld.com/blog/2021/2/26/rsus-no-sell-tax If you are in California, then your employer will not give you all your RSU but sell 40% and give you 60%. So you don’t have a big scary surprise when it’s tax season. https://blog.myrawealth.com/insights/rsu-tax-rate https://blog.myrawealth.com/insights/rsu-tax-rate
- lotsofpulp 5y ago> If you earn more than $523,600 and are single, then your tax rate is not 50% but 37% The federal income tax rate only for income above $523k is 37%. Only for income above $523k. > If you are in California, then your employer will not give you all your RSU but sell 40% and give you 60%. So you don’t have a big scary surprise when it’s tax season. Withholding amounts seem irrelevant when discussing effective tax rates.
- erwincoumans 5y agofederal + income tax + social taxes will be closer to 45% in California, at that income level (approx. 30% federal tax, 10% state tax, 4% FICA)
- lotsofpulp 5y agoI am getting 42% according to this website: https://smartasset.com/taxes/income-taxes#gJwOxy2ei7 https://smartasset.com/taxes/income-taxes#gJwOxy2ei7 But that is without 401k/HSA/etc.
- vecinu 5y agoHSA contributions and gains are taxable in California, so that won't help your taxes.
- pyrale 5y ago