Effective Tax Rate in NYC

Hi guys! I will be starting my IB job this July. I am a little confused with how bonuses are treated, tax-wise. I will be working in NYC, making 85k in salary, 50k (estimated) in bonus, and 10k in sign-on. It would be great if someone could explain to me the breakdown of taxes, for this income. I am trying to calculate my effective tax rate for my entire compensation. Thanks in advance for your help!

WSO Elite Modeling Package

  • 6 courses to mastery: Excel, Financial Statement, LBO, M&A, Valuation and DCF
  • Elite instructors from top BB investment banks and private equity megafunds
  • Includes Company DB + Video Library Access (1 year)

Comments (37)

May 28, 2018 - 10:04am

Your bonus is treated as ordinary income. So your effective bracket would be whatever bracket 145k for the year is in. Your bonus may get taxed more up front because of payroll software, but you will get the remainder back when you file your taxes. Just based off a quick google search, your effective tax rate should be a little over 30% all in which equates to like 44k.

May 30, 2018 - 3:21pm

Thanks, this is really helpful! One more question, does this include NY state and NYC taxes as well? I'm trying to figure out my total effective tax rate. Thanks again!

Array
May 30, 2018 - 1:59pm

also, since you no longer get a deduction on federal for state and local taxes...your rate will be a little higher. If you can, claiming residency in florida vs NYC (no income tax) will help save you ~ 8%

just google it...you're welcome
May 30, 2018 - 2:49pm

I'm not an accountant or tax lawyer, but I'm pretty sure that this is bad advice. If you work in NYC but claim residency in Florida, New York State is going to be all over you, demanding receipts, lease agreements, utility bills, travel records, or anything else you can produce to demonstrate that you spent more than 6 months and 1 day in Florida / outside of NYC. Which you're not going to be able to do. Best case scenario you end up paying your NYS taxes and a stiff penalty. Worst case you are charged for tax evasion.

  • 2
Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
May 30, 2018 - 3:24pm

Claim residency in a nearby state but not FL. The parasitic NYC will be all over you to bleed you dry. That game can be played in other cities, but not NYC. Problem is NJ and CT will rape you all the same.

Gotta love how YOU have to prove the city wrong. Fucking dump.

  • 1
  • 1
May 30, 2018 - 3:41pm

i'm actually planning on moving to Florida for this exact reason (i often trade remotely from home...so i can be anywhere). I'll keep a small place in NYC as a pied-a-terre...but since i'm able, i see no reason to keep it as my permanent residence.

just google it...you're welcome
May 30, 2018 - 3:42pm

NYC Tax question (Originally Posted: 03/04/2012)

Fellow prospective monkeys/monkeys who interned in NYC last year,

I have scoped out some past threads but have not been satisfied with the number of different opinions.

For a short internship ~ 10 weeks in 2011, are we considered a Part - Year Resident for tax purposes and thus taxed at the local (NYC) level. This is of course assuming we are from states outside NY.

I am about to file my taxes claiming non-residency for NYC and NY State. The instructions to Form IT-203 state clearly a resident is considered someone who is a) domiciled there (unless you have a permanent place of abode in NYC) or b) spent 184 days or more in this permanent place.

What does everyone think? I certainly cannot be f***** paying an extra ~$1k for a city tax! Are you serious?

May 30, 2018 - 3:44pm

Are you using electronic prep software? I first tried using TurboTax and it wouldn't let me count days to be considered a non resident for tax purposes (I found other people on their discussion board complaining about it). I ended up using HR Block, because they let me enter the number of days I was in the city, so I didn't have to pay city tax. I was able to count my residency in another state because I moved in the late summer to start work here. Your case might be different though, because it sounds like you're still in school.

I actually think the cut-off is 180 days. Some of the partners at my firm count days so they can be considered residents of CT. NYC is pretty strict about what they consider a "day" - even if you come into the city for dinner and aren't doing work it's considered a "day" spent in the city.

May 30, 2018 - 3:46pm
acrew09:
Are you using electronic prep software? I first tried using TurboTax and it wouldn't let me count days to be considered a non resident for tax purposes (I found other people on their discussion board complaining about it). I ended up using HR Block, because they let me enter the number of days I was in the city, so I didn't have to pay city tax. I was able to count my residency in another state because I moved in the late summer to start work here. Your case might be different though, because it sounds like you're still in school.

I actually think the cut-off is 180 days. Some of the partners at my firm count days so they can be considered residents of CT. NYC is pretty strict about what they consider a "day" - even if you come into the city for dinner and aren't doing work it's considered a "day" spent in the city.

No I am not. Prep software cannot handle my case as I have lived in multiple states throughout the year. With this, I reshuffle where I elect to get taxed. That way I take advantage of filing thresholds and significantly lower my effective tax rate.

May 30, 2018 - 3:51pm

It is mind boggling to me that people who are smart enough to work in IB can't figure out how to estimate their own tax bracket using a form 1040. It will take you all of five minutes to do.

And $100 might get you fucked up return at H&R block if you are lucky. Come on man.

"Strength does not come from physical capacity. It comes from an indomitable will."
  • 2
May 30, 2018 - 3:52pm

As a general rule of thumb, You should avoid getting tax advice on an Internet forum. Pay the extra money to speak to an accountant who is actually licensed to talk about this stuff and save yourself a lot of time/money in the long run.

May 30, 2018 - 3:58pm
existor:

Interested in this as well. Leaving in Europe I can't imagine giving away almost half of my pay to the government. Is there any legal way to exploit a loophole or sth?

Are you Greek? You sound like you could be from Greece...

  • 2
May 30, 2018 - 3:55pm

Well I don't want to do it myself because I don't think I am qualified and probably won't save myself the max amount of money. I am looking for loopholes etc. to maximize this. Any CPA's in NYC you would recommend?

May 30, 2018 - 3:56pm

As someone pointed out above, you can estimate your tax liability very easily with the tax schedules. I don't think there's much of a way to reduce withholding on bonuses.

The difference on what you would earn on the extra withholding you get back in a refund is minimal. Probably a couple of hundred dollars or less in most scenarios at entry level income ranges. Paying an accountant would likely more than wipe that out.

May 30, 2018 - 3:57pm

If you are really, really, really against giving Uncle Sam a free loan, you should have no taxes withheld, and pay the appropriate amount on tax day. This is a stupid idea though because most people are not disciplined enough the save the money for taxes.

"Strength does not come from physical capacity. It comes from an indomitable will."
May 30, 2018 - 4:00pm
big f-ing deal:

If you are really, really, really against giving Uncle Sam a free loan, you should have no taxes withheld, and pay the appropriate amount on tax day. This is a stupid idea though because most people are not disciplined enough the save the money for taxes.

You will also likely have to pay estimated taxes in the following year because your tax liability will be well over $1,000 (see IRS Form 1040-ES). The IRS will do everything they can to force you to give them the interest free loan, and as @DickFuld said above, what you would earn on the money will be immaterial to you. I would probably cost you more than you would save to have a tax pro optimise your withholdings. But I guess if you'd rather give your money to a CPA than the government, then that's an option.

May 30, 2018 - 4:01pm

You have a fairly simple tax situation but just the unknown of what your bonus will be, which can jump you into a different marginal tax bracket.

Forget about optimizing your withholding. It's peanuts to you. If you could stick it in a MM account and make 6% (and if your income was drastically higher) then maybe you work through it more in depth. All you need right now is turbo tax taxcaster (a free calculator) and some free time to play with it. That should ballpark it for you.

You want to optimize your taxes right? Max out your 401k for the year (might be just enough to keep you under the threshold to deduct some student loan interest assuming your only working 6 months). Then... well... actually that's all you really need to know right now..

If you can save more I'd open a Roth IRA (will help lower taxes in the future). You're probably not ready to buy property or obtain a mortgage. You could always move to New Jersey to save on taxes and commute in. You can always make charitable contributions. I guess if your going to invest in a taxable account be sure to do so tax efficiently (no taxable bond holdings or REITs, be sure to tax loss harvest (and avoid wash sales), keep trading to a minimum, etc.)

That's all there is for now...

Most Helpful
May 30, 2018 - 4:04pm

New York Has Highest Taxes in the Nation (Originally Posted: 04/11/2009)

Not really news to those of you unfortunate enough to live there, but New York took top honors once again with a flurry of new taxes. But there's plenty of rich guys left to pay, right?

According to Census Bureau data, over the past decade 1.97 million New Yorkers left the state for greener pastures -- the biggest exodus of any state. New York City has lost more than 75,000 jobs since last August, and many industrial areas upstate are as rundown as Detroit. The American Legislative Exchange Council recently said New York had the worst economic outlook of all 50 states, including Michigan. And that analysis was done before these $4 billion in new taxes.

Maybe not so much. But at least the little guy won't get slammed, right? Well...

The new budget raises another $2 billion or so on top of the $4 billion in income taxes with some 100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents. There are new charges for cell phone usage, fishing permits, health insurance (the "sick tax"), electric bills, and on bottled water, cigars, beer and wine. A New York Post analysis found that a typical family of four with an income below $100,000 would pay more than $800 a year in higher taxes and fees.

You can look on the bright side, guys. Your legislators obviously have a lot of faith in your earning ability. Make sure you don't let them down.

May 30, 2018 - 4:06pm

I read this article off of the WSJ and honestly this lends a a lot of credibility to the rumors that the new financial capitals of the world are going to be located in free market micro states like Singapore (or Hong Kong though the specter of China is always a discounting factor).

London is just as bad if not worse than NYC and only serves as a base because Europe has shit for other possible locations.

The only shame is all the beautiful real estate that's going to be left when "Wall Street" moves on out. I guess they will make it rent controlled housing or something...

May 30, 2018 - 4:08pm
juniorr:
Would NJ be any better? I've never lived in either state so I'm wonder if its possible to live in NJC and commute to NY just to avoid the high taxes.

people definitely do that, although convenience varies depending on where in NYC you work

May 30, 2018 - 4:09pm

Vel sit molestiae quisquam iure nisi aliquid non. Et quibusdam totam a aut iste est. Aliquid et aut quibusdam rerum magnam voluptatem.

Atque sunt quo rerum laboriosam velit beatae rerum qui. Occaecati dolor asperiores repellendus doloremque corrupti qui sint. Maxime cum assumenda atque qui rem.

Iure et ea tempora officiis illum repellendus voluptatem. Vel ut autem quibusdam aliquam rem provident ut itaque. Est aperiam architecto consectetur fugiat. Quia id omnis mollitia nihil rerum officia.

May 30, 2018 - 4:10pm

Animi maxime harum perferendis molestiae officiis et. Qui perferendis perspiciatis sit debitis eaque deserunt tenetur. Porro illum praesentium aut quia dolor assumenda.

Delectus dolorem libero ipsa tenetur. Maiores consequatur consequatur sapiente sequi vero. Quia repellendus libero hic deserunt. Doloribus soluta voluptatum aut dolor.

Id voluptate eius qui non. Consequatur autem delectus deleniti minima. Eum totam consectetur consectetur quos corrupti ducimus.

Start Discussion

Total Avg Compensation

December 2021 Investment Banking

  • Director/MD (10) $853
  • Vice President (40) $360
  • Associates (236) $235
  • 2nd Year Analyst (145) $156
  • 3rd+ Year Analyst (34) $154
  • Intern/Summer Associate (107) $146
  • 1st Year Analyst (514) $136
  • Intern/Summer Analyst (394) $84