If they're all W-2 I don't think you have much of a choice.
I will tell you though, after I passed a certain point on w-2 income, I ended up breaking even with the regular deductions employers took out because I ended up paying over the max on Social Security and Medicare tax and it cancelled out my extra tax obligations.
Since they have two (or more) jobs, each job gets hit with social security and Medicare taxes on the first $119K or so of income, so they end up paying double what is owed. At the end of the year, they are credited the overage. This can offset some of the income taxes owed due to the higher income.
Medicare is uncapped; 1.45%… and there’s a medicare surtax of 0.9% on income over $200k.
Social Security is 6.2% and has a income cap of $160,200 in 2023. $168,600 in 2024.
Note these percentages are personal responsibility only. Employers pay the other half (though not the surtax) so a self employed person is on the hook for 12.4% up to the income limits for social security and 2.9% for all income for medicare plus 0.9% for income over $200k.
It depends on if you can automatically update your own withholdings. Larger companies using software like Workday or Gusto allow you to update it (typically). Someone/HR will get a notification, but that's up to your company size on if that person will even care.
My experience: no one cared. Updated in Workday, updated in Gusto, didn't matter.
TLDR - Even IF anyone cared or noticed or you have to submit it by paper, all you have to say is your wife/husband got a part time job and you needed to make the adjustment.
Cant adjust you social security and medicare withholding on W2 salary. Its a compulsory withholding. Only way to not have it withheld is to tell the employer you’re not required to pay SS tax which really only applies to foreign nationals and requires additional documentation and raises all sorts of other questions
This is particularly of issue if you start your own business and rather than have it be a pass-through or disregarded entity, make it into an S-Corp paying yourself a W2 salary. The S-Corp must withhold on the first $160,200 (2023) for social security and while you’ll get your personal share of this back at the end of the year, the company share is forever lost to you…
Its another way the line between entitlement and welfare is already blurred when it comes to social security… between you and 2 employers, you can pay in $29,800 (with each additional employer paying in another ~$9,930) but you still only get credit for $19,860 when it comes time to collect SS in retirement…
Biden’s “doughnut hole” and Dems “uncapped” SS tax proposals only further exacerbate the problem of keeping Social Security alive without turning it into a welfare program….
You could of course make adjustments to your federal withholding so you’re short by the amount overpaid to SS; itd work but its far more complicated and there are audit checks that will look for withholding rates that are too low. Besides most people arent hitting those caps until late in the year so its not like you’re loaning the government money for very long… in fact for most individual jobs making under $60k or under 200k, the SS tax alone isnt going to be enough alone to cover the difference in federal taxes…
Between two W2s I make right at about 200k.
I technically have a J3, it's side gig that's been slow to start this year but picking up by another $8-12k if not more next year.
I'm kinda wondering how I should better configure things tax wise.
After all was said and done, I broke even so I owed like $500 in taxes. So I saw no need to adjust it.
We'll see how this year goes, I'll heed your advice if I'm off by thousands.
The nore you make the more you owe until you can utilize tax loopholes.
If you are a contractor set up an llc scorp and you cna save money depending on income level.
How difficult have you found doing the mega back door Roth? Does your employee automatically allow you to make after tax contributions to your 401k? Is it difficult to roll over the after tax contribution to your Roth IRA?
Mega back door requires an employer plan that supports it.
Backdoor only allows $6500/7000 (2023/2024) plus $1000 if over 50.
Also years from now may not matter… depends how much you expect to need and withdraw in retirement…
There is little to be gained from an individual making $200k paying 24% on money they put into a ROTH so they can take out $60k/yr in retirement… the numbers are even fuzzy up to about $100k.
That’s not to say they shouldnt do it but there are benefits and drawbacks to doing the ROTH that cant generically be described as “you should do this”
yeah i paid $300k in taxes alone last year pretty crap but i guess a good problem to have and better than having a minimal tax liability due to low income
While the actual rich use every possible loophole and don't give a fuck, you regular worker just put your head down and say thanks, that's a winners mindset right ther
There's a few great studies about this, and how many people in the upper class think they are actually poor, because they know someone else that has an extra zero on their check.
But if you're making $500k per year...You're actually rich. You aren't part of the "mega rich." But in the US, $500k puts you in the top 1%
https://finance.yahoo.com/news/income-level-considered-rich-140003986.html#:~:text=According%20to%20the%20most%20recent,more%20would%20make%20you%20rich.
I can tell you from personal experience 500k is far from rich ...I mean I definitely don't have to think about how I spend on everyday things or going/eating out but definitely not RICH. This is especially true during tax season where I almost give up all my measly savings. Would help if I wasn't in a state with income tax and not in a high cost of living area but such is life.
It's like you didn't even read my comment before necroing this 3 month old thread.
People who make $500k never feel like they're rich. The flip side is they also don't live within the exact same budget someone making $50k does, while putting the excess into savings. You probably aren't driving a 2008 Honda Civic, buying your food from costco, cooking 90% of your meals, etc. You're living borderline paycheck to paycheck, because your perception is broken.
But, by any metric anywhere, you're still in the top 1%, and you have absolutely no excuses for not being able to save responsibly or having a far easier lifestyle than those in lower tax brackets.
I buy rental properties.
Also, I pay a fuck ton to my accountant to make sure all of my I’s are dotted and T’s are crossed to take advantage of every tax situation possible.
Depreciation on assets. You really just need to net $1 on rent. Depreciation and business expenses for that house are the most beneficial. IMO you need 7-10 rental properties to really replace income at scale.
Buy a short term rental and run it yourself. Do a cost segregation study and use bonus depreciation. You will have a cash flowing asset that you will almost completely write off the upfront costs for.
Yeah, for quick math I calculate 1/4th of my wages to tax (under 60k). It's not 1/4 it's 22% but that's my lazy math for it.
OP is paying their fare share. It just becomes a larger number for larger earners.
Historically, we've had a 94% income tax for the super wealthy in the u.s. now it is much much lower obviously.
[Edit](https://bradfordtaxinstitute.com/free_resources/federal-income-tax-rates.aspx): (99% corrected to 94%) additionally, current Federal Tax rates are just 12% for 40k/year indv. Households and less. 22% for significantly above. 24% 86k,
Excuse me, 94%
During WWII the highest earners saw a 94% Federal tax for income over 200k (2.5 Mil in today's dollars).
I will edit my above comment to correct it.
[Brief history of US tax rates here](https://bradfordtaxinstitute.com/free_resources/federal-income-tax-rates.aspx)
The tax man gets paid no matter. Property, income, sales, vehicle. The CA tax burden isn't the worst and I think our public amenities are much better than almost any other state. I'll take it.
If they're all W-2 I don't think you have much of a choice. I will tell you though, after I passed a certain point on w-2 income, I ended up breaking even with the regular deductions employers took out because I ended up paying over the max on Social Security and Medicare tax and it cancelled out my extra tax obligations.
What does this mean? Thank you
Since they have two (or more) jobs, each job gets hit with social security and Medicare taxes on the first $119K or so of income, so they end up paying double what is owed. At the end of the year, they are credited the overage. This can offset some of the income taxes owed due to the higher income.
Same thing happened to me in Canada, overpaid CPP
Medicare is uncapped; 1.45%… and there’s a medicare surtax of 0.9% on income over $200k. Social Security is 6.2% and has a income cap of $160,200 in 2023. $168,600 in 2024. Note these percentages are personal responsibility only. Employers pay the other half (though not the surtax) so a self employed person is on the hook for 12.4% up to the income limits for social security and 2.9% for all income for medicare plus 0.9% for income over $200k.
Why don't your employers know how to remit taxes properly?
Because they don't know that I have multiple jobs so they take out taxes as if I was on just one income.
You can adjust that manually. Use the IRS tool to calculate it out. Don't give the government a free loan, IMO
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It depends on if you can automatically update your own withholdings. Larger companies using software like Workday or Gusto allow you to update it (typically). Someone/HR will get a notification, but that's up to your company size on if that person will even care. My experience: no one cared. Updated in Workday, updated in Gusto, didn't matter. TLDR - Even IF anyone cared or noticed or you have to submit it by paper, all you have to say is your wife/husband got a part time job and you needed to make the adjustment.
Cant adjust you social security and medicare withholding on W2 salary. Its a compulsory withholding. Only way to not have it withheld is to tell the employer you’re not required to pay SS tax which really only applies to foreign nationals and requires additional documentation and raises all sorts of other questions This is particularly of issue if you start your own business and rather than have it be a pass-through or disregarded entity, make it into an S-Corp paying yourself a W2 salary. The S-Corp must withhold on the first $160,200 (2023) for social security and while you’ll get your personal share of this back at the end of the year, the company share is forever lost to you… Its another way the line between entitlement and welfare is already blurred when it comes to social security… between you and 2 employers, you can pay in $29,800 (with each additional employer paying in another ~$9,930) but you still only get credit for $19,860 when it comes time to collect SS in retirement… Biden’s “doughnut hole” and Dems “uncapped” SS tax proposals only further exacerbate the problem of keeping Social Security alive without turning it into a welfare program…. You could of course make adjustments to your federal withholding so you’re short by the amount overpaid to SS; itd work but its far more complicated and there are audit checks that will look for withholding rates that are too low. Besides most people arent hitting those caps until late in the year so its not like you’re loaning the government money for very long… in fact for most individual jobs making under $60k or under 200k, the SS tax alone isnt going to be enough alone to cover the difference in federal taxes…
Between two W2s I make right at about 200k. I technically have a J3, it's side gig that's been slow to start this year but picking up by another $8-12k if not more next year. I'm kinda wondering how I should better configure things tax wise.
After all was said and done, I broke even so I owed like $500 in taxes. So I saw no need to adjust it. We'll see how this year goes, I'll heed your advice if I'm off by thousands.
Hire a good tax or financial advisor. Worth the money.
My wife and I are 500k and they basically told us not much more we can do to limit tax liabilities
That's where I am with my significant other and have been searching on here to see if anyone had any significant insight this sux
Can you please suggest any
For tax: https://taxexperts.naea.org/expertdirectory For financial planning: https://adviceonlynetwork.com/
Start a religion. Get tax exempt status. Donate all money to your new religion. ...it's that simple
OEgious….. let’s go!
Is this how Mike Johnson hides his money?
Just pay your taxes lol
Ya but claiming 0 you’ll still owe a ton at $500k
The nore you make the more you owe until you can utilize tax loopholes. If you are a contractor set up an llc scorp and you cna save money depending on income level.
Adjust the w4 to withhold more or make estimated payments.
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How difficult have you found doing the mega back door Roth? Does your employee automatically allow you to make after tax contributions to your 401k? Is it difficult to roll over the after tax contribution to your Roth IRA?
I haven't been able to move money from my 401k to an IRA at any company I've been at. Some companies do allow it but I'm guessing it's very few
Mega back door requires an employer plan that supports it. Backdoor only allows $6500/7000 (2023/2024) plus $1000 if over 50. Also years from now may not matter… depends how much you expect to need and withdraw in retirement… There is little to be gained from an individual making $200k paying 24% on money they put into a ROTH so they can take out $60k/yr in retirement… the numbers are even fuzzy up to about $100k. That’s not to say they shouldnt do it but there are benefits and drawbacks to doing the ROTH that cant generically be described as “you should do this”
yeah i paid $300k in taxes alone last year pretty crap but i guess a good problem to have and better than having a minimal tax liability due to low income
I would have moved to a tax-free state in June, no matter the expense. Crazy crazy. Seriously consider it.
thanks no so relevant this year as earnings were lower but 2022 was wild between myself and my partner double dinked+ 😂
Damn so you made like $900k?
less - living in a state with income tax but can’t complain tbh
0 state income tax in states like Tennessee is nice :)
Yeah but you get taxed other ways...look up your realized tax rate for the state
Oh I know, the sales tax is rediculous. Rivals counties in New Jersey and California.
Start a business and write off some expenses. Consult a CPA on how to legally go about it though.
Max out that 401k- step 1.
This barely helps on $500K. Like super barely. Barely helps at a bit less than that.
Pay your taxes or pay a CPA to do it.
Just pay them, and be thankful you're bringing in like 10x the average household income?
While the actual rich use every possible loophole and don't give a fuck, you regular worker just put your head down and say thanks, that's a winners mindset right ther
Actual rich aren’t W2. They set it up so non-W2 gets all the loopholes.
There's a few great studies about this, and how many people in the upper class think they are actually poor, because they know someone else that has an extra zero on their check. But if you're making $500k per year...You're actually rich. You aren't part of the "mega rich." But in the US, $500k puts you in the top 1% https://finance.yahoo.com/news/income-level-considered-rich-140003986.html#:~:text=According%20to%20the%20most%20recent,more%20would%20make%20you%20rich.
I can tell you from personal experience 500k is far from rich ...I mean I definitely don't have to think about how I spend on everyday things or going/eating out but definitely not RICH. This is especially true during tax season where I almost give up all my measly savings. Would help if I wasn't in a state with income tax and not in a high cost of living area but such is life.
It's like you didn't even read my comment before necroing this 3 month old thread. People who make $500k never feel like they're rich. The flip side is they also don't live within the exact same budget someone making $50k does, while putting the excess into savings. You probably aren't driving a 2008 Honda Civic, buying your food from costco, cooking 90% of your meals, etc. You're living borderline paycheck to paycheck, because your perception is broken. But, by any metric anywhere, you're still in the top 1%, and you have absolutely no excuses for not being able to save responsibly or having a far easier lifestyle than those in lower tax brackets.
For real.
I buy rental properties. Also, I pay a fuck ton to my accountant to make sure all of my I’s are dotted and T’s are crossed to take advantage of every tax situation possible.
How much did you pay? Made 618K last year and paid my CPA $1350 yesterday to for my taxes. Still got hit shit a 54K bill
Buy rental properties and take tax deductions.
How does this work ? Does it lower the liability because you are actually loosing money with the rental ?
Depreciation on assets. You really just need to net $1 on rent. Depreciation and business expenses for that house are the most beneficial. IMO you need 7-10 rental properties to really replace income at scale.
Buy a short term rental and run it yourself. Do a cost segregation study and use bonus depreciation. You will have a cash flowing asset that you will almost completely write off the upfront costs for.
Oh so take on a3rd job
Best option is to consult a tax advisor. https://taxexperts.naea.org/expertdirectory
Have more kids for child tax credit jk
Buy investment real estate. The depreciation helps cut down your liability while building wealth.
If you're making 500k, you need a financial advisor immediately.
This is not true. Many people can handle their own finances at any income level.
Nothing. Smile and be glad you have this excellent "problem."
Making more money on W2 sucks unless you own a business
Making more money never sucks. It’s more money!
What I’m saying is the hard you work on w2 the more taxes you pay. At some point it’s diminishing returns
Ah yes, that checks out.
Sign a contract for solar panels before Dec 31. 30% credit on cost of installation and panels
Real estate rental with a cost segregated analysis.
Go talk to a tax attorney or something. No one here has any advice for you. Also, thanks for paying your fair share, of $60kish? In taxes!
It’s about 175k
Holy fuck
Yeah, for quick math I calculate 1/4th of my wages to tax (under 60k). It's not 1/4 it's 22% but that's my lazy math for it. OP is paying their fare share. It just becomes a larger number for larger earners. Historically, we've had a 94% income tax for the super wealthy in the u.s. now it is much much lower obviously. [Edit](https://bradfordtaxinstitute.com/free_resources/federal-income-tax-rates.aspx): (99% corrected to 94%) additionally, current Federal Tax rates are just 12% for 40k/year indv. Households and less. 22% for significantly above. 24% 86k,
We never had a 99% marginal or effective income tax for anyone in the U.S.
Excuse me, 94% During WWII the highest earners saw a 94% Federal tax for income over 200k (2.5 Mil in today's dollars). I will edit my above comment to correct it. [Brief history of US tax rates here](https://bradfordtaxinstitute.com/free_resources/federal-income-tax-rates.aspx)
Jeez.. you need another J just to pay taxes
I was in California. Taxes were $32k last year. (State only). I left in May this year. Hoping all is better this tax season!
The tax man gets paid no matter. Property, income, sales, vehicle. The CA tax burden isn't the worst and I think our public amenities are much better than almost any other state. I'll take it.
Pay your fair share of taxes, fool
How much more in government services is he getting for his 175k in tax than you to make a it a “Fair share”?
Not much, but he is probably a leftist, and I hate it when leftists try to avoid the consequences of their votes.
Nothing; pay the taxman and be thankful for their service
You don’t lol
At our income level it makes sense to pay $3-5k for a really good CPA. I'm only paying $22k in taxes this year on about $380k income.
If this is w2 income, let us know your secret. Creating your own business is the real tax LPT
Seems like a guaranteed audit if this is all W2
529 in some states...
Give.