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Comment by matchagaucho | Hacker News Reader

To put this in bay area perspective, that $300K per year gets broken down as:

  42% Tax bracket. Net $180K per year
  $6K per month in rent/mortgage. Net $108K
  $3K per month in living expenses. $72K
  $1K student loans (maybe). Net $60K
  $1K in insurance (health / renters / home). Net $48K
  $1K disposable income. Net $36K
  $8K vacation. Net $28K ( or about $2.3K per month for savings)

Not bad. But you can see how bay area cost of living can quickly erode income.

Add kids, dependents, cars, transportation, day care, private schools... and it's a net wash (or possibly even net negative with more debt).

[EDIT: If we're getting precise here, the effective tax is 38.18% before deductions. The point being that $150K yr is near the poverty line in bay area. $200K is barely enough to survive. $300K is what a FAANG will pay 90 percentile Engineers to ensure they're comfortable]

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This math is remotely not accurate. 42% tax rate ? Tax rates are progressive. I made a whole lot more last year and my effective Federal + State was 28%. Remember, there are a ton of deductions available. $6k in rent ?? Who pays that ? I have a large house and my mortgage payment is close to 4.5k. And I am building massive equity on my home as well as paying down an expensive asset. Home insurance is $1k for the whole year, while health insurance is roughly $250/month for the whole family. If you play your cards right, you can save upto 200-300k in 3-4 years. Now here's the cherry on top. Add a partner who makes the same amount.

Enter $300K into https://smartasset.com/taxes/income-taxes

Take home pay for CA is $185K

I entered "married" in the same calculator and it gives me a 29.75% effective rate and 210k take home. If your math above is for a single person, I haven't met anyone who is paying more than $2500 in rent. $6k for a single person is way out of range.

> I haven't met anyone who is paying more than $2500 in rent.

Out of everyone know, I'm the only one paying under $2500. How many bedrooms and what's the square footage of these places? Are they shared?

Before deductions.

Just tried in TurboTax. $300k income in CA has effective tax rate of 35%.

I filed my taxes with TurboTax last year. Did you account for state tax deduction, mortgage deduction, property tax deduction, standard deduction, child tax credits, 401k deductions, charity deductions, and a myriad of other options ? There is no way for anyone to say what an accurate effective rate would be. Mine was 28% last year

There are new rules that are not particularly advantageous for people making good money in CA due to the fact that CA has a fairly high state income tax rate and the new limits for the bucket of deductions it fits in.

https://www.fidelity.com/viewpoints/personal-finance/how-has...

If you own a home in the Bay Area, chances are you hit the limit on your property taxes alone.

Guess the OP files taxes as married filing jointly. That could cause a dip in the effective tax rate.

you get hit by AMT. Or at least it used to be the case, before Trump changes - didn't do my taxes this year yet. 30% Federal + 15% state, and when you try to do deductions, you hit AMT.

> $6K per month in rent/mortgage.

Seriously? A 1BR can cost like $2.5k in Sunnyvale. Even in Boston/Cambridge I could get a really nice 1BR for $3.5k max.

pretty fast and loose with the numbers there, don't you think? 6k rent/mortgage + 3k living expenses sounds flat out glamorous.

And a $6k vacation! lolol

Sure, you can easily spend that amount, but it's hardly a living expense. For a single person, that a long European vacation, with no effort made to control costs.

If you have a family it’s about right if not conservative.

Right but if there's a family then the tax line item is drastically lower. Like 28% effective, not 42% effective.

This is BS. I was renting in BA (a 3br in Inner Richmond) in 2015 and my total spend without kids and with gf not making much at all (i.e. I paid for most of the good stuff like vacations and restaurants), calculated precisely by Mint, was about 70-80k a year. That includes 1-3 vacations a year in places like Italy, China, etc. Sure, in 2019 it would be 90-110k due to the rent, big deal. Wtf are the living expenses excluding rent and insurance that add up to 3k, do you eat foie gras every day in rural Kansas?

Also, look up "marginal tax rate" and "effective tax rate".

Maybe that total would put someone in the 42% tax bracket (if you include city/state taxes, and even then I’m not sure), but that doesn’t mean someone would only keep 58% of their income, due to how a marginal tax system works, and that’s also not counting any itemized deductions and exemptions.

Any decent accountant should be able to save at least $10-20k more of that fast and loose tax total.

Also— if you’re paying $6k a month in rent, and you can afford the down payment, why not just buy a home at that point? If you want to relocate you can sell it and you’d get a decent mortgage interest deduction that would affect the bottom line.

Agreed. For a married couple at $300k in the bay area, less than $90k goes to taxes, and that's assuming just standard deduction. Realistically, if you're paying $6k/month for housing not including insurance, you're probably itemizing another $5-$10k above the standard deduction. And at $300k, you're hopefully maxing out a $19k 401k contribution pretax. Probably you'd be spending <$80k/year in tax.

Those numbers are really high. Keep in mind the person who wrote this article mentioned 2 years of experience so they are probably ~25 years old. They probably spend half that much on rent/living expenses, like 10% of that much on insurance and probably do not take $8k vacations. They should be able to save at least ~60k per year.

That's not how the regressive tax system works. Your effeective tax rate is around 38%

A nice 2 bed 2 bath is 4k, not 6k

I don't even know how you would spend 3k a month in living expenses.

All of those numbers are seem pretty off.

That's not how tax brackets work!

I thought their numbers would be really bad because of that but it was actually pretty close. Effective tax rate in SF would be 38% and if you are maxing your 401k you are left with 175k net.

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