Can ones personal tax liability be over 50% of their total income unadjusted for AGI in a single year?
by Mortgage Rates on Sunday, October 10th, 2010 | 4 Comments
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Absolutely it can be over 50%. Most often it happens when a person is self-employed. That will double their FICA tax. Between that, fed,state, & local, I’ve seen it add up to over 50% before.
Whether it’s consider “overtaxing” would be another matter.
If it were me, and I was earning $500K a year, I think I could find a way to squeeze out a living on $240K take-home pay…
Being in the 35 percent tax bracket doesn’t mean they take 35 percent of your total pay for taxes. Tax brackets are done on a sliding scale. Here’s an explanation:
http://www.moneychimp.com/features/tax_brackets.htm
And anyone who makes over $500K a year wouldn’t be taxed on all their income. If they didn’t have a mortgage (not likely), they’d have much of their money invested in various tax shelters, investments, and retirement funds.
if you are in the 35% federal bracket – you do not pay 35% on every taxable dollar – there are several lower tax brackets, that you pay lower rate of tax on before you start paying 35% on every dollar above a certain level
I’m in the 25% tax bracket, but only paid about 12% of my gross pay in federal income tax
my overall tax rate was about 26% including FICA, FIT State and local income taxes and I grossed more than $106,000 last yr
and if you are looking for a % of AGI – I seriously doubt it would get near 50% overall, because the actual TAXABLE federal income will be reduced by exemptions, standard or itemized deductions and possibly more, so that further reduces the tax % of AGI
and there is a limit to the amount of income you pay eh 6.2% FICA tax on, so that’s a big savings after your income exceeds that – 106,800 taxable wages in 2009, 2010
If a person who made that much paid that much tax, I’d seriously question the competence of his accountants. People with those incomes find ways to protect it from taxes. I’m not commenting on the morality of it, just giving facts.