Quote:
Originally Posted by Daradon
I know this is true in Canada, as the tax rate goes up as you go up in income brackets, but is it true in the States? I guess it's hard to pinpoint exactly as there are many types of taxes from many jurisdictions, but aren't a lot of the income taxes flat percentages across the board?
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Just to add some more detail to Vlad's response:
- Taxes are indeed progressive in the US, both at the Federal and State levels.
- Social security is a flat ~6% tax on the first ~100K of gross salary (going off the top of my head).
- Medicare is about 1.5% with no limit on the gross salary that is taxable.
Ways to reduce Federal taxable income:
- mortgage interest
- contribute to a 401K or 403b... annual limit is currently 16500.
- contribute to a traditional IRA (Roth IRA takes after tax income)
- if you make enough money and are an "officer" at a corporation, you may also qualify for the 457 plan. This allows another 16500 to be deposited as deferred compensation and is contingent on the solvency of the business.
- procreate
Things change if you're a hedge fund manager. Chuck Schume... er... The hedge fund managers have lobbied to have their salary considered as basically an at-risk investment, and have managed to have their salary treated like a long term capital gain at ~15%. This is ridiculous and is nothing but a payoff to the rich. But whatever.