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  • Marginal Rates

    All this talk about Pass through deduction and it’s phase out has me really thinking about marginal tax rates for the first time. Even without that phase out my marginal rate is going to be 35% plus 3.8% Medicare plus 6% state (not deductible). It really makes me feel that that additional call or chart review work or whatever really isn’t worth it. If I am in the s Corp phase out, and I probably will be, it is definitely not worth it as I’ll be at 60% marginal. Unless something changes I’ll be taking less call and more vacation next year, not a bad thing.

  • #2
    Just so I’m clear, the 60% marginal issue never got fixed? I make $500k as an md in an s-Corp and my wife makes $240 as salaried md. Does this mean I need to bail on the s-Corp?

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    • #3
      I think you will lose the whole deduction at your incomes. That means your marginal rate is back DOWN to 35 plus the Medicare tax plus state tax.

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      • #4
        Assuming you make over ~115k/yr, you are not paying the 6/12% in social security.  You do pay the 3.8/7.6% medicare tax on all salaried income with no cap.  It sounds like you are incorporated, and if so, you should likely be drawing a fixed salary, with the rest being paid as owner draws, and you pay neither SS or Medicare tax on that money.

        So yes, you are paying the 35% plus state income tax on increased earnings, but you should have already suffered the pain from the self employment tax.

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        • #5




          All this talk about Pass through deduction and it’s phase out has me really thinking about marginal tax rates for the first time. Even without that phase out my marginal rate is going to be 35% plus 3.8% Medicare plus 6% state (not deductible). It really makes me feel that that additional call or chart review work or whatever really isn’t worth it. If I am in the s Corp phase out, and I probably will be, it is definitely not worth it as I’ll be at 60% marginal. Unless something changes I’ll be taking less call and more vacation next year, not a bad thing.
          Click to expand...


          Yes, I know how you feel. My marginal tax rate has been 46% the last couple of years. If you don't really like the work and don't need the money, taxes definitely provide some additional incentive to not do it.

          In some ways, I think a VAT or consumption tax might be better for our economy. Then we'd be incentivizing production and disincentivizing consumption.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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          • #6




            Assuming you make over ~115k/yr, you are not paying the 6/12% in social security.  You do pay the 3.8/7.6% medicare tax on all salaried income with no cap.  It sounds like you are incorporated, and if so, you should likely be drawing a fixed salary, with the rest being paid as owner draws, and you pay neither SS or Medicare tax on that money.

            So yes, you are paying the 35% plus state income tax on increased earnings, but you should have already suffered the pain from the self employment tax.
            Click to expand...


            It's been a few years since it was $115K. I think it was $127,500 this year and going up for next year.
            Helping those who wear the white coat get a fair shake on Wall Street since 2011

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            • #7
              I didn't realize I was that far off.  I saw something that referenced $115k recently, and was too lazy to verify.

              If you really want to make your head bleed, add the 8% sales tax that you pay on the 50% of your income you actually get to spend, then that total tax rate is 58%, unless you like to travel in which tax on plane tickets, car rentals, and hotels can go as high as 20%.

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