what's your effective income tax rate?

[Anonymous]

Line 15 (Taxable Income): $2,414,403
Total Tax: $574,627

Marginal Tax Rate: 37%
Effective Tax Rate: 23.8% — Includes NIIT and AMT.

A lot of my income was capital gains and dividends so paid a lot less taxes than if it had all been regular “earned” income.

[Anonymous]

Anonymous wrote:Line 15 (Taxable Income): $2,414,403
Total Tax: $574,627

Marginal Tax Rate: 37%
Effective Tax Rate: 23.8% — Includes NIIT and AMT.

A lot of my income was capital gains and dividends so paid a lot less taxes than if it had all been regular “earned” income.

PP here — I live in a no income tax state so no state income taxes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Line 15 (Taxable Income): $2,414,403
Total Tax: $574,627

Marginal Tax Rate: 37%
Effective Tax Rate: 23.8% — Includes NIIT and AMT.

A lot of my income was capital gains and dividends so paid a lot less taxes than if it had all been regular “earned” income.

PP here — I live in a no income tax state so no state income taxes.

Jealous. I recently put together a list that ranked states by tax burden (not just income tax), whether Social Security is taxed, and whether pension income is taxed. I'm stuck in DC until I retire but definitely considering establishing residency elsewhere for retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Line 15 (Taxable Income): $2,414,403
Total Tax: $574,627

Marginal Tax Rate: 37%
Effective Tax Rate: 23.8% — Includes NIIT and AMT.

A lot of my income was capital gains and dividends so paid a lot less taxes than if it had all been regular “earned” income.

PP here — I live in a no income tax state so no state income taxes.

Jealous. I recently put together a list that ranked states by tax burden (not just income tax), whether Social Security is taxed, and whether pension income is taxed. I'm stuck in DC until I retire but definitely considering establishing residency elsewhere for retirement.

DC would be at the bottom of any list I put together regardless of tax burden.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:37%

37% can't be your effective tax rate - it's the top bracket, meaning all your income below the top bracket is taxed at a lower rate. You would literally need to make infinity dollars for that to be your effective tax rate.

I think this is possible when you consider that there's state taxes (DC is 10% ish for the highest bracket). Medicare is also higher (.9%) for earners above 200K.

I think the disconnect here is that the poster who keeps arguing that other posters are overstating their effective tax rates (and who I kept trying to satisfy with actual numbers from my tax return) is only considering the tax imposed by section 1 (i.e., the basic income tax brackets). While taxes such as employment taxes should be excluded from the effective income tax rate, there are income taxes other than those in section 1. For me, these include (1) SECA, which is an income tax that is the self-employed person's analogue to FICA, and adds 12.4% on net earnings from self-employment (but then subtracts 1/2 of that in the AGI adjustment), (2) Additional Medicare Tax, 0.9%, which is also an income tax even though it has Medicare in its name, and (3) net investment income tax, which adds a 3.8% tax on investment income. So, you absolutely can go above the brackets, particularly if you are self-employed, which includes anyone who is a partner.

But, state taxes would not be included in calculating your effective federal income tax rate.

FICA and Medicare taxes could also be considered income taxes. The law says they are imposed “on income.” Just shows how arbitrary this question is.

No, they aren't. The income tax code is organized into subtitles. See here:

https://www.law.cornell.edu/uscode/text/26

Income taxes are subtitle A. Employment taxes is subtitle C. They are distinctly different taxes. I don't know what you're quoting from with "on income" but FICA (Medicare is a subset of FICA) is imposed on wages, defined here:

https://www.law.cornell.edu/uscode/text/26/3121

There is often overlap between what is income and what is wages but they are defined separately and subject to completely separate tax regimes.

“In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).”

“In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)).”

You forgot to bold "of the wages." Did you click on the table of contents? To repeat, income taxes are in subtitle A; employment taxes are in subtitle C. Full stop.

What's your point? Wages are income.

Sigh. No, they're not. The Venn diagram of wages and income largely overlap but they are two different things subject to two different tax regimes. Income is defined in section 61, which is part of the subtitle A regime. A number of sections in that regime exclude items from income. To exclude those same items from wages, you need a separate exclusion in the subtitle C regime. If there were no difference between the two, these provisions would be redundant. Take, for example, employer-provided medical care. It is excluded from income under section 105 (for reimbursements) and 106 (for premiums). Section 3121(a)(2) separately excludes these amounts from wages for purposes of FICA, and section 3306(b)(2) excludes them from FUTA wages. If they were the same thing, you wouldn't need different exclusions. These are different taxes, governed by different code sections, paid on different returns, and enforced by different IRS branches.

I feel like I am trying to explain that the earth is, in fact, round.

So what you're saying is, wages and income are different because employer provided medical care is excluded from both wages and income? You're literally just naming a similarity.

"All wages, salaries and tips you received for performing services as an employee of an employer must be included in your gross income." https://www.irs.gov/taxtopics/tc401. Wages are income.

Um, no. It is true that wages are usually also income (that's the overlapping Venn diagram) but it is not true that employment taxes are income taxes. The same (or mostly the same) dollars are subject to two different regimes, and the employer collects the advance deposit for income taxes, and the actual tax for employment taxes.

I am saying that if two regimes were one, one exclusion would do the trick. The reason you need two is because they are applied against two separate regimes. That is, if 105 and 106 existed but 3121(a)(2) did not, then the value of your employer healthcare would be wages but not income. That is, it would be excluded from Box 1 of your W-2 because it wouldn't be income, but it would be reported in Boxes 3 (Social Security) and 5 (Medicare) because it would be wages. Another example is that certain amounts can be income in one year but wages in a different year. This is true for nonqualified deferred compensation. It is FICA-taxed when it vests (due to a special timing rule under section 3121(v)) but income-taxed when it pays out.

This is all true of the Additional Medicare Tax, but according to you that’s an income tax.

[Anonymous]

30%

I can’t afford to remodel the kitchen, buy curtains, furniture, or get a root canal, but I gave the government $150,000.

[Anonymous]

AGI (Line 15) 1.8m
Taxes: $420k
Effective tax rate: 23.3%

Own a small business and also a principal investor in a business abroad. I included the foreign taxes paid in the taxes above, since I get credited those on Fed taxes.

[Anonymous]

9.76% federal according to TurboTax

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:37%

37% can't be your effective tax rate - it's the top bracket, meaning all your income below the top bracket is taxed at a lower rate. You would literally need to make infinity dollars for that to be your effective tax rate.

I think this is possible when you consider that there's state taxes (DC is 10% ish for the highest bracket). Medicare is also higher (.9%) for earners above 200K.

I think the disconnect here is that the poster who keeps arguing that other posters are overstating their effective tax rates (and who I kept trying to satisfy with actual numbers from my tax return) is only considering the tax imposed by section 1 (i.e., the basic income tax brackets). While taxes such as employment taxes should be excluded from the effective income tax rate, there are income taxes other than those in section 1. For me, these include (1) SECA, which is an income tax that is the self-employed person's analogue to FICA, and adds 12.4% on net earnings from self-employment (but then subtracts 1/2 of that in the AGI adjustment), (2) Additional Medicare Tax, 0.9%, which is also an income tax even though it has Medicare in its name, and (3) net investment income tax, which adds a 3.8% tax on investment income. So, you absolutely can go above the brackets, particularly if you are self-employed, which includes anyone who is a partner.

But, state taxes would not be included in calculating your effective federal income tax rate.

FICA and Medicare taxes could also be considered income taxes. The law says they are imposed “on income.” Just shows how arbitrary this question is.

No, they aren't. The income tax code is organized into subtitles. See here:

https://www.law.cornell.edu/uscode/text/26

Income taxes are subtitle A. Employment taxes is subtitle C. They are distinctly different taxes. I don't know what you're quoting from with "on income" but FICA (Medicare is a subset of FICA) is imposed on wages, defined here:

https://www.law.cornell.edu/uscode/text/26/3121

There is often overlap between what is income and what is wages but they are defined separately and subject to completely separate tax regimes.

“In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).”

“In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)).”

You forgot to bold "of the wages." Did you click on the table of contents? To repeat, income taxes are in subtitle A; employment taxes are in subtitle C. Full stop.

What's your point? Wages are income.

Sigh. No, they're not. The Venn diagram of wages and income largely overlap but they are two different things subject to two different tax regimes. Income is defined in section 61, which is part of the subtitle A regime. A number of sections in that regime exclude items from income. To exclude those same items from wages, you need a separate exclusion in the subtitle C regime. If there were no difference between the two, these provisions would be redundant. Take, for example, employer-provided medical care. It is excluded from income under section 105 (for reimbursements) and 106 (for premiums). Section 3121(a)(2) separately excludes these amounts from wages for purposes of FICA, and section 3306(b)(2) excludes them from FUTA wages. If they were the same thing, you wouldn't need different exclusions. These are different taxes, governed by different code sections, paid on different returns, and enforced by different IRS branches.

I feel like I am trying to explain that the earth is, in fact, round.

So what you're saying is, wages and income are different because employer provided medical care is excluded from both wages and income? You're literally just naming a similarity.

"All wages, salaries and tips you received for performing services as an employee of an employer must be included in your gross income." https://www.irs.gov/taxtopics/tc401. Wages are income.

Um, no. It is true that wages are usually also income (that's the overlapping Venn diagram) but it is not true that employment taxes are income taxes. The same (or mostly the same) dollars are subject to two different regimes, and the employer collects the advance deposit for income taxes, and the actual tax for employment taxes.

I am saying that if two regimes were one, one exclusion would do the trick. The reason you need two is because they are applied against two separate regimes. That is, if 105 and 106 existed but 3121(a)(2) did not, then the value of your employer healthcare would be wages but not income. That is, it would be excluded from Box 1 of your W-2 because it wouldn't be income, but it would be reported in Boxes 3 (Social Security) and 5 (Medicare) because it would be wages. Another example is that certain amounts can be income in one year but wages in a different year. This is true for nonqualified deferred compensation. It is FICA-taxed when it vests (due to a special timing rule under section 3121(v)) but income-taxed when it pays out.

This is all true of the Additional Medicare Tax, but according to you that’s an income tax.

Yes, that's right. These aren't subjective judgmental determinations. There is an unambiguous answer as to what is an employment tax and what is an income tax because it says it right there in the table of contents to the Internal Revenue Code. I know Additional Medicare Tax is an income tax because the drafters told me so by putting it in subtitle A. No tax practitioner of sound mind would assert otherwise.

I think you're getting bogged down in a tax technical question on which you are unquestionably wrong rather than focusing on what I think is your more interesting underlying point: what is your total tax burden and how should we measure it? The tax burden does include both income, and employment taxes. It also includes gift tax, estate tax, property tax, sales tax, and state income and payroll taxes. There are a number of other types of taxes that could apply but typically do not affect individuals. Measuring that total burden is really what matters at a practical level, but it is not easily calculated without a big spreadsheet and a lot of recordkeeping.

So, if properly understanding the tax burden is what you're getting at, I'm with you. But on the tax technical issue, your argument would be rejected as frivolous if it ever saw the light of day before the IRS, the tax court, or just your basic marginally competent tax attorney.

[Anonymous]

In 2022 it was 27.8% of AGI.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:37%

37% can't be your effective tax rate - it's the top bracket, meaning all your income below the top bracket is taxed at a lower rate. You would literally need to make infinity dollars for that to be your effective tax rate.

I think this is possible when you consider that there's state taxes (DC is 10% ish for the highest bracket). Medicare is also higher (.9%) for earners above 200K.

I think the disconnect here is that the poster who keeps arguing that other posters are overstating their effective tax rates (and who I kept trying to satisfy with actual numbers from my tax return) is only considering the tax imposed by section 1 (i.e., the basic income tax brackets). While taxes such as employment taxes should be excluded from the effective income tax rate, there are income taxes other than those in section 1. For me, these include (1) SECA, which is an income tax that is the self-employed person's analogue to FICA, and adds 12.4% on net earnings from self-employment (but then subtracts 1/2 of that in the AGI adjustment), (2) Additional Medicare Tax, 0.9%, which is also an income tax even though it has Medicare in its name, and (3) net investment income tax, which adds a 3.8% tax on investment income. So, you absolutely can go above the brackets, particularly if you are self-employed, which includes anyone who is a partner.

But, state taxes would not be included in calculating your effective federal income tax rate.

FICA and Medicare taxes could also be considered income taxes. The law says they are imposed “on income.” Just shows how arbitrary this question is.

No, they aren't. The income tax code is organized into subtitles. See here:

https://www.law.cornell.edu/uscode/text/26

Income taxes are subtitle A. Employment taxes is subtitle C. They are distinctly different taxes. I don't know what you're quoting from with "on income" but FICA (Medicare is a subset of FICA) is imposed on wages, defined here:

https://www.law.cornell.edu/uscode/text/26/3121

There is often overlap between what is income and what is wages but they are defined separately and subject to completely separate tax regimes.

“In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).”

“In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)).”

You forgot to bold "of the wages." Did you click on the table of contents? To repeat, income taxes are in subtitle A; employment taxes are in subtitle C. Full stop.

What's your point? Wages are income.

Sigh. No, they're not. The Venn diagram of wages and income largely overlap but they are two different things subject to two different tax regimes. Income is defined in section 61, which is part of the subtitle A regime. A number of sections in that regime exclude items from income. To exclude those same items from wages, you need a separate exclusion in the subtitle C regime. If there were no difference between the two, these provisions would be redundant. Take, for example, employer-provided medical care. It is excluded from income under section 105 (for reimbursements) and 106 (for premiums). Section 3121(a)(2) separately excludes these amounts from wages for purposes of FICA, and section 3306(b)(2) excludes them from FUTA wages. If they were the same thing, you wouldn't need different exclusions. These are different taxes, governed by different code sections, paid on different returns, and enforced by different IRS branches.

I feel like I am trying to explain that the earth is, in fact, round.

So what you're saying is, wages and income are different because employer provided medical care is excluded from both wages and income? You're literally just naming a similarity.

"All wages, salaries and tips you received for performing services as an employee of an employer must be included in your gross income." https://www.irs.gov/taxtopics/tc401. Wages are income.

Um, no. It is true that wages are usually also income (that's the overlapping Venn diagram) but it is not true that employment taxes are income taxes. The same (or mostly the same) dollars are subject to two different regimes, and the employer collects the advance deposit for income taxes, and the actual tax for employment taxes.

I am saying that if two regimes were one, one exclusion would do the trick. The reason you need two is because they are applied against two separate regimes. That is, if 105 and 106 existed but 3121(a)(2) did not, then the value of your employer healthcare would be wages but not income. That is, it would be excluded from Box 1 of your W-2 because it wouldn't be income, but it would be reported in Boxes 3 (Social Security) and 5 (Medicare) because it would be wages. Another example is that certain amounts can be income in one year but wages in a different year. This is true for nonqualified deferred compensation. It is FICA-taxed when it vests (due to a special timing rule under section 3121(v)) but income-taxed when it pays out.

This is all true of the Additional Medicare Tax, but according to you that’s an income tax.

Yes, that's right. These aren't subjective judgmental determinations. There is an unambiguous answer as to what is an employment tax and what is an income tax because it says it right there in the table of contents to the Internal Revenue Code. I know Additional Medicare Tax is an income tax because the drafters told me so by putting it in subtitle A. No tax practitioner of sound mind would assert otherwise.

I think you're getting bogged down in a tax technical question on which you are unquestionably wrong rather than focusing on what I think is your more interesting underlying point: what is your total tax burden and how should we measure it? The tax burden does include both income, and employment taxes. It also includes gift tax, estate tax, property tax, sales tax, and state income and payroll taxes. There are a number of other types of taxes that could apply but typically do not affect individuals. Measuring that total burden is really what matters at a practical level, but it is not easily calculated without a big spreadsheet and a lot of recordkeeping.

So, if properly understanding the tax burden is what you're getting at, I'm with you. But on the tax technical issue, your argument would be rejected as frivolous if it ever saw the light of day before the IRS, the tax court, or just your basic marginally competent tax attorney.

Additional Medicare Tax is in Subtitle C. In fact, it’s in the same exact code section as the regular Medicare tax.

https://www.law.cornell.edu/uscode/text/26/3101

[Anonymous]

Anonymous wrote:30%

I can’t afford to remodel the kitchen, buy curtains, furniture, or get a root canal, but I gave the government $150,000.

So you’re saying your income was $500,000 and you can’t afford to buy curtains? Sure.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:37%

37% can't be your effective tax rate - it's the top bracket, meaning all your income below the top bracket is taxed at a lower rate. You would literally need to make infinity dollars for that to be your effective tax rate.

I think this is possible when you consider that there's state taxes (DC is 10% ish for the highest bracket). Medicare is also higher (.9%) for earners above 200K.

I think the disconnect here is that the poster who keeps arguing that other posters are overstating their effective tax rates (and who I kept trying to satisfy with actual numbers from my tax return) is only considering the tax imposed by section 1 (i.e., the basic income tax brackets). While taxes such as employment taxes should be excluded from the effective income tax rate, there are income taxes other than those in section 1. For me, these include (1) SECA, which is an income tax that is the self-employed person's analogue to FICA, and adds 12.4% on net earnings from self-employment (but then subtracts 1/2 of that in the AGI adjustment), (2) Additional Medicare Tax, 0.9%, which is also an income tax even though it has Medicare in its name, and (3) net investment income tax, which adds a 3.8% tax on investment income. So, you absolutely can go above the brackets, particularly if you are self-employed, which includes anyone who is a partner.

But, state taxes would not be included in calculating your effective federal income tax rate.

FICA and Medicare taxes could also be considered income taxes. The law says they are imposed “on income.” Just shows how arbitrary this question is.

No, they aren't. The income tax code is organized into subtitles. See here:

https://www.law.cornell.edu/uscode/text/26

Income taxes are subtitle A. Employment taxes is subtitle C. They are distinctly different taxes. I don't know what you're quoting from with "on income" but FICA (Medicare is a subset of FICA) is imposed on wages, defined here:

https://www.law.cornell.edu/uscode/text/26/3121

There is often overlap between what is income and what is wages but they are defined separately and subject to completely separate tax regimes.

“In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).”

“In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)).”

You forgot to bold "of the wages." Did you click on the table of contents? To repeat, income taxes are in subtitle A; employment taxes are in subtitle C. Full stop.

What's your point? Wages are income.

Sigh. No, they're not. The Venn diagram of wages and income largely overlap but they are two different things subject to two different tax regimes. Income is defined in section 61, which is part of the subtitle A regime. A number of sections in that regime exclude items from income. To exclude those same items from wages, you need a separate exclusion in the subtitle C regime. If there were no difference between the two, these provisions would be redundant. Take, for example, employer-provided medical care. It is excluded from income under section 105 (for reimbursements) and 106 (for premiums). Section 3121(a)(2) separately excludes these amounts from wages for purposes of FICA, and section 3306(b)(2) excludes them from FUTA wages. If they were the same thing, you wouldn't need different exclusions. These are different taxes, governed by different code sections, paid on different returns, and enforced by different IRS branches.

I feel like I am trying to explain that the earth is, in fact, round.

So what you're saying is, wages and income are different because employer provided medical care is excluded from both wages and income? You're literally just naming a similarity.

"All wages, salaries and tips you received for performing services as an employee of an employer must be included in your gross income." https://www.irs.gov/taxtopics/tc401. Wages are income.

Um, no. It is true that wages are usually also income (that's the overlapping Venn diagram) but it is not true that employment taxes are income taxes. The same (or mostly the same) dollars are subject to two different regimes, and the employer collects the advance deposit for income taxes, and the actual tax for employment taxes.

I am saying that if two regimes were one, one exclusion would do the trick. The reason you need two is because they are applied against two separate regimes. That is, if 105 and 106 existed but 3121(a)(2) did not, then the value of your employer healthcare would be wages but not income. That is, it would be excluded from Box 1 of your W-2 because it wouldn't be income, but it would be reported in Boxes 3 (Social Security) and 5 (Medicare) because it would be wages. Another example is that certain amounts can be income in one year but wages in a different year. This is true for nonqualified deferred compensation. It is FICA-taxed when it vests (due to a special timing rule under section 3121(v)) but income-taxed when it pays out.

This is all true of the Additional Medicare Tax, but according to you that’s an income tax.

Yes, that's right. These aren't subjective judgmental determinations. There is an unambiguous answer as to what is an employment tax and what is an income tax because it says it right there in the table of contents to the Internal Revenue Code. I know Additional Medicare Tax is an income tax because the drafters told me so by putting it in subtitle A. No tax practitioner of sound mind would assert otherwise.

I think you're getting bogged down in a tax technical question on which you are unquestionably wrong rather than focusing on what I think is your more interesting underlying point: what is your total tax burden and how should we measure it? The tax burden does include both income, and employment taxes. It also includes gift tax, estate tax, property tax, sales tax, and state income and payroll taxes. There are a number of other types of taxes that could apply but typically do not affect individuals. Measuring that total burden is really what matters at a practical level, but it is not easily calculated without a big spreadsheet and a lot of recordkeeping.

So, if properly understanding the tax burden is what you're getting at, I'm with you. But on the tax technical issue, your argument would be rejected as frivolous if it ever saw the light of day before the IRS, the tax court, or just your basic marginally competent tax attorney.

Additional Medicare Tax is in Subtitle C. In fact, it’s in the same exact code section as the regular Medicare tax.

https://www.law.cornell.edu/uscode/text/26/3101

Actually, you're partly right on this one (first time!). Your link is to section 3101, which imposes the two components of FICA: OASDI (aka Social Security), and HI (aka Medicare). The Additional Medicare Tax is imposed on both wages, and net earnings from self-employment (similar to FICA and SECA but with a bit more coordination). For me, because I only have net earnings from self-employment, my Additional Medicare Tax is under section 1401 here:

https://www.law.cornell.edu/uscode/text/26/1401#:~:text=In%20addition%20to%20other%20taxes,income%20for%20such%20taxable%20year.

So, for me, it is an income tax. For someone earning wages over the applicable threshold, it is collected as an employment tax and credited against the income tax.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What's your effective income tax rate on reported income (wages and realized gains) this year?

10.1% effective, and pretty proud of it…paid $21,600 in fed tax on $213,300 in wages and capital gains/dividends/interest. Live in FL, so no state income tax. One spouse working a job, the other a stay-at-home parent, and one kid. Maxed a 401k, Roth IRA, spousal traditional IRA, and a family HSA. Lots of planning involved if you wanna beat the taxman.

So in other words, you’re doing what many other posters on DCUM have been doing as well.

Basically, but DCUM/boglehead types are in a tiny minority compared to the average wage-earner/taxpayer. In random chats among co-workers with similar incomes I’ve discovered that very few contribute anything past the match in their 401k, many have spouses working ~$50k/year jobs while paying $3k+/month in daycare costs for multiple kids (which is a net loss after taxes on that ~$50k of income), get surprise 5-figure bills at tax filing time because their withholdings are set way too low (but it’s because they need the cash ASAP throughout the year), while simple things like HSAs, IRAs, and 529s are practically foreign concepts. Instead of planning and sacrificing to defer as much income as possible and give it decades to grow, they’re shortsightedly handing it straight over to Uncle Sam today. These are the people who will be working well into their 70s because retirement at their same standard of living while working will be completely unaffordable.

[Anonymous]

Anonymous wrote:Line 15 (Taxable Income): $2,414,403
Total Tax: $574,627

Marginal Tax Rate: 37%
Effective Tax Rate: 23.8% — Includes NIIT and AMT.

A lot of my income was capital gains and dividends so paid a lot less taxes than if it had all been regular “earned” income.

Heads-up. Biden’s FY25 budget proposal nearly doubles the capital gains tax rate to 39.6%. The proposed capital gains rate increase would apply to investors who make at least one million dollars a year. Will Democrats socialist forced distribution of wealth policies ever end?