Originally Posted By Mr X Is 38% the highest tax bracket? What sort of income would result in a 38% tax rate?
Originally Posted By Mr X Sorry...specifically curious about the United States (England is a lot higher, right Sarah?).
Originally Posted By sarahwithbaloo No I thought that as soon as I posted. If nobody comes back I'll ask MIL as she usually knows that sort of thing (even for US)
Originally Posted By RoadTrip Currently the highest U.S. tax bracket is 35%, and that is charged on income earned in excess of $349,700. The first $349,700 is charged at lower rates. Here is a tax calculator that shows pretty well how things work. <a href="http://www.moneychimp.com/features/tax_brackets.htm" target="_blank">http://www.moneychimp.com/feat ures/tax_brackets.htm</a>
Originally Posted By DVC_dad Of course if you own a true c corporation and are not able to extract the profits from that corporation before year end, and move those profits over to your personal W-2 earnings, you can be taxed at the corporate level as well, so really, the effective tax rate for some people is a LOT higher than 35%.
Originally Posted By DVC_dad Or I guess at this point it isn't the RATE, but the dollars that you are paying tax on, that matters...if you get what I am trying to say. ??? Well, it makes sense to me.
Originally Posted By DVC_dad Of course this can really begin to get complicated if you own multiple businesses, and rental property, and second homes, and all that jazz... (which I don't.) Anyway, the higest individual income tax rate may be 35%, but that is never the end all, be all. I figure if we have about 47 more kids we will be sittin' pretty come tax time! ;P
Originally Posted By DVC_dad Okay forget I ever posted anything in this topic. Truth is, it doesn't matter how much taxable income you have if you spend a dollar more than you make each year.
Originally Posted By SuperDry RT is right - it's 35%, but that's only on ordinary income. Long-term capital gains are taxed at a maximum of 15%. Also, the portion of ordinary income that is earned income (that is, wages from a job) is also subject to the 1.45% Medicare tax, and that has no cap (you'd be capped at the maximum Social Security tax well before you'd get to the 35% bracket, so I don't include that here). If you're self-employed or own the business you work for, then Medicare is really 2.9% as you have to pay the employer's portion as well. And then there are state income taxes in most states, and even local income taxes in places like NYC. But to narrow your question to being about just US federal income tax on wages for a regular working Joe, then it's currently 35% + 1.45% for Medicare for income above $349,700. But considering that that income amount is on taxable income (i.e. after deductions) and not gross income, someone would probably have to make close to $400,000 in wages a year (assuming a few dependents and a normal housing situation) to get put into the 35% bracket.
Originally Posted By davewasbaloo OMG - I'm moving back home then. Anyone earning over $60,000 pays 45% here in the UK. Then our sales tax is 17.5%. Then Factor in House Tax - $240 per month on a $250,000 home. I think the US would work out much more economically advantageous.
Originally Posted By SuperDry ^^^ I'm not sure how far off that is from many places in the US. For example, California has a state income tax that's over 9% at the top, so that would put a top wage earner over 45% including federal and state income tax and Medicare. And note that although Medicare tax is paid by all wage-earners in the US, generally speaking only those over 65 are eligible for coverage. Don't your taxes in the UK include universal health coverage for all? And your property tax is about 1.2% per year. Here in Texas, it's about double that.
Originally Posted By davewasbaloo Indeed - it does cover medical and dental, though the quality is sometimes questionable. Plus it covered my bachelor's degree. So I suppose it does maybe balance out. Then again, there are no real personal tax write offs here in the UK.
Originally Posted By fkurucz In Colorado we have a flat state income tax of aboput 4.6%. This is applied only to income after Federal Deductions. There is no national sales tax in the US. Local sales tax where I live is about 7%. Groceries are taxes about 3.5%. I pay about .6% property tax on my house. As SuperDry mentioned, we do not have a national health system in the US. I was informed by my employer that the total cost for my and my familes health insurance is about $12500 per year. Dental is another $1500, vision is $353, long term disability is another $350 (Social Security does offer disability benefits, but you need more than what they provide). My employer covers about 2/3 of the cost.
Originally Posted By fkurucz <<Then again, there are no real personal tax write offs here in the UK.>> In the US the most common federal income tax write offs include: Home mortgage interest paid Home property tax State income tax paid Vehicle proprty taxes I was able to itemize about 30,000 last year, and that amount was not subject to federal income tax. The Feds also provide a child credit, about $1000 per child under 17. This is a credit, not a deduction. You also get a deduction ($2500?) for each dependent, including yourself and spouse. Short story: I paid income tax on only about 60% of my income.
Originally Posted By davewasbaloo Oh man, I get my first $7000 tax free, then no deductables at all. I do get $34 a month child tax credit, but that is all. Car Tax is an interesting one - we pay $480 a year per car tax. And there is 80% tax levied on fuel - so we pay about $2.16 a liter for diesel.
Originally Posted By davewasbaloo And thankfully I do not smoke. Smokers pay about $10 for 20 cigarettes because of the tax on those bad boys.
Originally Posted By SuperDry <<< Is 38% the highest tax bracket? What sort of income would result in a 38% tax rate? >>> Reading your question a bit closer, taxable wages from self employment over $349,700 would be taxed at a total of 37.9% including Medicare - perhaps that's what your source is referring to. Although, with that kind of income, it's easy enough to incorporate as a Subchapter S corporation and pay yourself a reasonable salary but past that take the rest of the income as shareholder distributions - this way, you still get hit with the 35% rate but don't have to pay Medicare on the distribution.
Originally Posted By Mr X Well, I'm not quite sure SD but it was just a casual mention by a relative that got me to thinking a) boy that sounds like a high tax bracket and b) he must be making a lot of money to be so high up if that's correct. In any case, he's a CEO of his own company (along with partners) with 12 employees, so I imagine it's not a self-employment type of situation. I was just curious as to whether or not that was the *highest* but obviously there are alot of factors in play in determining such a number. Thanks for all the info.
