So my total tax rate in the US is just shy of 50%. Software developers are actually in the "sweet spot" for paying a ton in taxes: they make enough money to qualify for the high tax rates, but not enough money to make it worth exploiting the loopholes that rich folks use to avoid paying taxes.
Another issue is that software developers are sometimes paid highly and are in top tax bracket. In New Zealand the top marginal tax rate is 39% (although I am guessing most software devs would be on 33% (Over $70,000 and up to $180,000) even at 33% it is not so motivating to be offered $1000 if $330 of that immediately disappears as taxes. Plus the hassle of recording amounts and declaring them - uggggh.
In California that top marginal tax rate is 13.3% so not quite the same problem as some other countries.
Total tax rate of 50%? This sounds extremely high. Are you sure you are not confusing between marginal and total tax rate? If you prepare you taxes with any software package, it usually tells your effective tax rate, does it really say 50% or near that? I checked back and they year I paid the most taxes I had effective rate of 24%, usually it's even less. I know software devs who make way more than me, but I don't see how even that would take them to 50%.
I think the parent was referring to effective tax rate. Tax rates are applied in graded steps, so you will only pay 40% on income over a certain amount.
Compared to what? The maximum federal rate is nearly 40%. Yes, there are many many countries with maximum rates in the 50-60% range. But 40%, even marginal, is not low.
> Are you confident about this? My experience as a single guy in that total comp range is closer to 25 percent taxation. The marginal rate is that high, but only a small chunk of a 200k income is taxed at that rate. In fact, Social Security caps out before there. And if you're married, it's even lower.
What state are you in? My experience is more similar to the parent post; bonuses which are part of your total comp get taxed slightly higher than base pay. After CA income tax, etc etc effective tax rate is easily 40%+.
I think 72K in the Netherlands for a software dev is rare, but maybe it's possible. But the 50% tax is not true, you don't pay 52% over the whole amount, it works with tiers. Over the first 20K you'll pay 36.5%, over the next 38K you'll pay 42% and over the remaining 14K you'll pay 52%.
This equals a net income of 45K, which is 3.75K per month.
A CPA friend of mine stated that software engineers are pretty screwed when it comes to taxes, they pay the highest effective rate. In effect, when you are in the $125k to $250k ballpark, you're at a high tax bracket but not making enough to take advantage of the things that allow (for example) Warren Buffet to have an effective tax rate of 11% [1]. So, in the shoes of a typical software engineer, their effective tax rate is ballpark 30~35% and their deductions are pretty minimal.
One example my CPA friend gave was landlords getting it good. They can both deduct depreciation and also repair costs - double dipping! Further, any interest on real estate loans they have are also tax deductible. I don't know of more specifics personally, the impression my friend gave me was that those examples are just the beginning.
> he mentioned he's getting taxed at 48-50% on top of this.
The highest income tax bracket is 45%, and you only pay that rate of tax on the money you earn past £125k – you don’t pay that rate on your entire income.
I can tell you that I’m a not terribly highly paid software dev (by US standards) in Ireland and my marginal tax rate is about 50%, and it could go up a few points if I made more. Add 40% tax on cap gains as well. And bank interest. (I get < 1 eur a year in interest, and they send 40% of it odd to revenue. Why bother? Hell if I know.)
If you work in tech you should be able to save at least 30%. I save 60%, and I also live in the highest marginal tax rate country in the world. If you can't it probably means you live beyond your means.
> It's tapered from 100 to 125k, but at no point is your employer paying 100% tax. From 100 to 125k, your marginal tax rate is ~60%, but drops after that point.
Actually you're right, I had misunderstood something. Looking at an online calculator, if you go from 100K to 125K gross, you take home 10K more.
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