Effective Tax Rate in NYC

DevGru23's picture
Rank: Senior Baboon | 208

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!

Comments (37)

Most Helpful
May 28, 2018

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.

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Funniest
May 28, 2018

fuck taxes

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May 30, 2018

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

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

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.

May 30, 2018

Yeah, that's why that wasn't a good comment -- you're not going to work FT in NY and be able to claim FL residency w/o breaking the law.

May 30, 2018

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.

May 30, 2018

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

It wont come out to 1k in city taxes. It's closer to ~300 for the 15 or so thousand you're earning.

May 30, 2018
Raptor.45:

It wont come out to 1k in city taxes. It's closer to ~300 for the 15 or so thousand you're earning.

You are right but I also got my 10k signing bonus withheld at the city level.

May 30, 2018

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
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

bump for a great thread!

I'd love to see that excel spreadsheet OP once you got this stuff down.
Thanks

May 30, 2018

bump

May 30, 2018

bump

May 30, 2018

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."

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May 30, 2018

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
lk22:

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.

This.

You are making $85,000 in your base alone. Pay the $200-$300 for a CPA to do your taxes.

May 30, 2018

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?

May 30, 2018
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...

May 30, 2018

Nope. Wish we got that much sun though.

May 30, 2018

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

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

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
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

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...

May 30, 2018

Wait so smaller bonuses and more taxes.

This is just fucking great.

May 30, 2018

wow. Just wow

BossMode

May 30, 2018

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

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.

May 30, 2018
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
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May 30, 2018