IB salaries and taxes

Getting around taxes? You don't mean tax evasion do you? As an employee you have 0 say in how you are taxed. If you are going to be working in NYC you should plan on around 50% deductions for taxes. Granted if you have a mortgage, which you likely won't, or can claim other major deductions that number will drop after your refund.

The 28% federal tax bracket is between $87K-$184K. If you make $125,000 that puts your federal effective rate at ~22.5%. That's just federal. Once you layer on additional state taxes and any other income taxes you will likely be very close to 30% on an effective basis.

Almost impossible to avoid paying income tax whilst on payroll.

AfricanFarmer:

Almost impossible to avoid paying income tax whilst on payroll.

Unfortunately true -_-

I did not mean evasion, I meant nifty ways that most of the country's top earners utilize (eg, 401k or IRA). Is there any sort of great book on how to do one's taxes and investments?

You can poke around the IRS website for information. I haven't heard of a book, but there are sometimes great articles on the topic on WSJ or Business Insider.

Is it a good idea to max out your 401k contributions (17000 a year, 653 per bi-weekly paycheck) as an analyst? I understand the huge value of tax-deferred compounding but I did some quick calculations and if I'm contributing the full amount every paycheck I'm going to have to be pretty damn frugal otherwise. On the other hand I'll do anything to reduce the ridiculous amount I pay NY State and NYC in taxes...

(Contributing the employer 401k match is a no-brainer, I'm talking about going way beyond that)

Also if your employer matches X% of your salary in 401k contributions, is your bonus included in your salary for that calculation typically? Because that would like practically double the dollar amount they match.

Raptor.45:

Also if your employer matches X% of your salary in 401k contributions, is your bonus included in your salary for that calculation typically? Because that would like practically double the dollar amount they match.

Usually it is not.

I did not mean evasion, I meant nifty ways that most of the country's top earners utilize (eg, 401k or IRA).

I mean, I wouldn't call retirement savings "nifty ways to avoid taxes". But sure.

The 28% federal tax bracket is between $87K-$184K. If you make $125,000 that puts your federal effective rate at ~22.5%. That's just federal. Once you layer on additional state taxes and any other income taxes you will likely be very close to 30% on an effective basis.

30%? I wish.

Federal Taxes: 22.5% FICA: 7.7% NY State: 6.5% NY City: 3.3% Effective Rate: 40%+

That's not to mention consumption taxes, which are 9% in the city. You're easily paying 50% of your money to the government in one way or another.

kingoftheotherroad:

which is why I refuse to live in the city.

By "in the city" do you mean you refuse to work in NY or you live in NJ or Westchester?

AnalystMonkey2769:

NorthSider:

Raptor.45:

Also if your employer matches X% of your salary in 401k contributions, is your bonus included in your salary for that calculation typically? Because that would like practically double the dollar amount they match.

Usually it is not.

I did not mean evasion, I meant nifty ways that most of the country's top earners utilize (eg, 401k or IRA).

I mean, I wouldn't call retirement savings "nifty ways to avoid taxes". But sure.

The 28% federal tax bracket is between $87K-$184K. If you make $125,000 that puts your federal effective rate at ~22.5%. That's just federal. Once you layer on additional state taxes and any other income taxes you will likely be very close to 30% on an effective basis.

30%? I wish.

Federal Taxes: 22.5%
FICA: 7.7%
NY State: 6.5%
NY City: 3.3%
Effective Rate: 40%+

That's not to mention consumption taxes, which are 9% in the city. You're easily paying 50% of your money to the government in one way or another.

isn't the bonus taxed at the HIGHEST federal income bracket level? or am I mistaken? I thought the number you gave above would be for base salary of $70k, but that would be 25% federal...please correct me as I've been told otherwise by people and would like clarification of how my bonus/base are taxed separately at different rates/brackets.

No. Bonuses are taxed as a regular income just like your salary. The difference is bonuses are withheld at a very high rate but you will get the difference between what they withhold and what you actually owe on that bonus come tax refund time.

Do BBs match 401k contributions? That seems to be going away.

ChrisHansen:

Do BBs match 401k contributions? That seems to be going away.

Most still do, though there are plenty of large organizations that don't.

AnalystMonkey2769:

isn't the bonus taxed at the HIGHEST federal income bracket level? or am I mistaken? I thought the number you gave above would be for base salary of $70k, but that would be 25% federal...please correct me as I've been told otherwise by people and would like clarification of how my bonus/base are taxed separately at different rates/brackets.

You're mixing up marginal and effective tax rates. All of your income (bonus included) are taxed at your effective rate, which accords pretty well with the numbers I listed above, give or take a couple percent based on your individual circumstances (bonus bucket, 401k contributions, itemized deductions, etc.). Your bonus is withheld at the marginal tax rate above $70k, which makes it appear that it is "taxed more".