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Small-Scale Question Sunday for November 5, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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How do income taxes work in the US? Let's say I am offered a salary of $100k, what's the rule of thumb to estimate my take-home pay?

For comparison, here's how it's done in Russia. Let's say I am offered 9M rubles per year. This amount includes my income tax that will be deducted by the employer and excludes my social security contributions that will be paid by the employer on top of 10M. There are just two tax brackets: 13% on the first 5M, 15% on the rest. So my take-home pay is 50.87+40.85=7.75M rubles annually.

From what I know about various EU countries, it's more or less the same, except the number of tax brackets is higher and there are additional concerns like having a (non-)working partner and/or underage children that affect the tax rate, but your income taxes are done by the employer.

... depends on how precise of an estimate you want.

The roughest value is to take your gross income, subtract the standard deduction, and then pass the value through marginal tax rates, for federal taxes. State (and sometimes county/city) taxes follow a similar process, albeit usually with much smaller marginal tax rates. There's also Social Security (6.2% up to 112k) and Medi* (1.45%) employee portions; while employers pay the same amount, this isn't reflected in income.

So for an unmarried US employee with no dependents (mostly means 'no kids') getting 100k USD, you'd take the single standardized deduction of 13,850 USD to give 86,150 USD of adjusted-gross income. The first 11k USD would be taxed at 10% (1,100 USD), the next 33,725 USD at 12% (4,047 USD), and the next 41,425 USD at 22% (9,113.5 USD), for a total of 14,260.5 USD in federal income taxes. SSI/Medi* doesn't use the normal deductions and applicable deductions for them are complex and rare (they're technically payroll taxes, not income taxes, but they're taxes based on income so fuck the IRS), so around 7560 USD for them.

State and county taxes vary a lot. A quick rule-of-thumb for 5% is wrong but not useless, and gives about 5k USD.

So an estimated post-tax-withholding income of around 73,089.5 USD. In practice, probably a little bit more than that due to other withholdings or lower state income taxes, but about that realm.

This presumes that you're taking the standardized deduction: for a lot of people this makes sense, especially at lower income ranges, but there are itemized deductions that can if you do a lot of charity donations, recently purchased your first property, so on. One that used to be more relevant was the state-and-local-tax (SALT) deduction, which let you deduct lots of state taxes from your federal income tax; it's since been capped at the same time that the standardized deduction was increased, so it's less likely to be a sole cause to itemize. There are also some tax credits that sometimes reduce this number (or even turn it negative for lower-incomes). I... honestly don't know off the top of my head whether income automatically directed to social security withholdings are part of your income for tax purposes or not, though the employer side definitely isn't considered part of your income for tax purposes (or even advertised to employees).

Note that this is specifically income taxes; the US does a lot with property and sales taxes, too. You will also probably have some other items taken out of your paycheck (health insurance usually being the big one), and your employer may have certain retirement plans you can choose to go with that are usually good deals but aren't liquid without some cost penalty.