At what point in the 100k -200k range does it make sense to get a lower salary?

I was once told by a CPA to NEVER plan on making money while doing business only for the tax reasons.

Besides what are you deductions, are you married, etc.

There is no sweet spot. Look at the tax rate. It is relatively flat in that range. After deductions, you will pay a certain percentage to tax, call it 25%. If you think that rate is too much at 200k then why is it not too much at 100k?
Earn it while you can. You do not know what tomorrow will bring.

There are loopholes that you can play to evade taxes. Rich people know them, poor people don’t make enough for it to matter. The middle class gets screwed.

There is no such point. When the tax rate increases due to a larger salary, it increases only on the amount over and above the cut-off point for the lower rate.

To make it easy, imagine that everyone who earns up to $100,000.00 per year gets taxed at 10% and everyone who makes over $100,000.00 gets taxed at 20%. If you make $100,001.00 for the year, the first hundred thousand is taxed at 10%, and you are only charged 20% on a dollar.

When you make more, you will still always bring home more money.

Listen to @augustlan her point is what most people don’t seem to understand. The higher tax bracket only applies to the money made in that bracket. If the higher bracket starts at $100k then you are only taxed the higher amount on money made above the $100k mark. It is up to you to decide if it is worth your time to work for the lower amount per hour you would make, assuming you have to work more hours to make more money. If it is just a salary, and you are going to work the same amount of hours no matter what, then of course the higher salary is better. With more money you can also take advantage of more write-offs and loopholes, because you can have more investments with more money coming in.

Some couples that will find themselves well into the upper tax bracket sometimes opt to have a spouse who does not earn much choose to not work, or work very little, since dollar per hour will wind up very low if the other spouse is the one who is the significant breadwinner.

Here are the new tax tables.

But, remember, your entire salary is not taxed.

@augustlan, if my taxable income is $100,001, and the bracket is upto $100,000; my entire income is taxed at the higher bracket not just the portion that puts you in the higher bracket.

@bkcunningham Wrong.

Perhaps I’m misunderstanding what you are saying, @JLeslie. Break it down for me, would you please. Because I know my entire taxable income is taxed at a rate in the bracket I fall into.

@bkcunningham See page 86 on my tax table link, there is a subtraction amount to close the gap of the straight percentage multiplication above $100k.

In the tax tables below $100k the math is done for you to adjust for each incremental amount more taxed at each level.

@bkcunningham :: Try reading this

As I stated above the rates are basically flat. I just looked at the tax tables provided by @JLeslie for married filing jointly and see that the rate does increase slightly from 25% to 28% as you move from $100k to $200k. Still basically flat.
I repeat. Earn it while you can.

@JLeslie, what you told me to look at is regarding capital gains and dividends. What I was referring to was @augustlan statement, “To make it easy, imagine that everyone who earns up to $100,000.00 per year gets taxed at 10% and everyone who makes over $100,000.00 gets taxed at 20%. If you make $100,001.00 for the year, the first hundred thousand is taxed at 10%, and you are only charged 20% on a dollar.”

@bkcunningham No, at the top it is just telling you wjat to do if you are using the table for capital gains, but thepage I told you was the continuation of the tax tables on income. If you go to the first page you will see where the yax tables start. The page I gave you is still referring tothe amount on line 43. I can look for the full the tax form….one second….I think it will help.

Here you go, this is the 1040 form for this year. Line 43 is taxable income. Capital gains would probably need some sort of separate form or schedule to be attached, and it depends on what type of capital gains to figure how much it is taxed, short term gains are taxed the same as income, or it was previously, not sure now, I am not up on the tax laws to be honest. Back when I owned some investment property for instance, if I held it over a year I was taxed less on the profit, less than a year same as regular income tax. So, depending on the gain, it might be added in with line 43 I think. I’ve had an accountant do my taxes for several years now, so I am not very familiar with the forms anymore.

I find it a little confusing to. It would be great to have a personal accountant on the Q who really knew how to explain it all. I just have not paid enough attention to taxes to be 100% sure of all the ins and outs at this point. If you go to www.IRS.gov, it usually has a ton of information.

@bkcunningham Logically, why would anyone take a $5k increase in pay, if in the end they would wind up with less money in their pocket total because of the risk of being in the next tax bracket? It just wouldn’t make sense. More money in income, more money in a persons pocket, even if the government is getting their share.

@JLeslie, do you mean why would someone want to make an additional amount that puts them in another tax bracket? Your example of $5000, for instance, that would put them in a new bracket?

@bkcunningham Yeah, lets use simple numbers just for an example. Say I make $100k and get taxed 25%. So, I take $75k home in my pocket. I get a $5k increase and my tax rate goes up to 30% because I am above $100k, so now at $105k I take home $73,500 after taxes. So, I would be taking home less at the higher salary, that is not how it works. No one would go for that.

There is an expanation on this wikipedia page also. See the “Example” near the top.

@bkcunningham I just noticed the very last page of the tax table link I originally posted shows how the tax tables are calcuated. You’ll see the last column states “for the amount over”

@JLeslie You always get me. :)