First year, if I make $600,000 in a No Income Tax State

[NoBias]

First year?

Realistically, you should be looking at how you can carry your losses forward or offset other income types.

Hypothetically, IF you make $600,000 your first year. I wouldn't worry too much about paying your taxes, you can afford it, and you should pay your taxes.

Then again, $100 normally will obtain this answer from a qualified Tax professional... the most appropriate source for this information.

But hey, This is ET...

By the way, hypothetical $600,000 is an odd number, why not $10k, $100k, $500K or $1 million?

What percentage of account is this? 6%, 10%, 100%, 1,000%, 10,000% ?

 

[Pekelo]

irregardless is not a word.

Sure it is. Words are determined by usage not by dictionaries. If people use it and they mean the same by it then it is a word. But don't believe me, Wiki says the same:

"Irregardless is a word commonly used in place of regardless or irrespective,"

And you didn't really answer his question. The correct answer is 28% and as someone pointed out we have to add the 3.8% Obamacare investment tax because he is over 200K, so that would be 31.8%...

http://www.forbes.com/sites/robertw...vestments-keep-your-investments/#757811020316

 

[i am nobody]

Almost all reactions here concern the US. I have a different one.

I paid taxes in Belgium. On 600,000 euro income I would pay in total 344,434.78 euro taxes.
I would have net 255,565.22 euro income. So taxes are 57.40% of my income.

Moving to another country changed the situation "a bit". There I pay on 600,000 euro only 10% taxes and a fix amount of 7,200 euro for social security, so I save 277,234.78 euro on taxes, or almost 24,000 euro each month.
All this in a legal construction.

Would you stay in the US if you should pay 57.40% taxes, which means that your government would make more money than you while you take all the risk and do all the work? They should just wait and cash in. Is that the social world people speak about while 30% don't pay any taxes at all but receive FREE MONEY from the government for a lifetime?
In Belgium the government is the major shareholder in every company without investing even 1 euro in it and taking no risks at all. They come end of the year and just take minimum 57.40% of all profits. And if they check the accounts of the company they always find "errors" to make you pay extra. And these fines are non deductible which means that you even pay 57.40% taxes on these fines. All this made me so angry that I did not want to work in that system anymore and I took action.

 

[zdreg]

My favorite is "Nobody does not tell me nothing about nobody no more."

yogi berra is looking down from heaven and smiling at you:"Always go to other people's funerals, otherwise they won't go to yours" etc.

 

[sprstpd]

$600K would put you in the top tax bracket.
- if it is ordinary income, it would be taxed at 39.6%
- if it is short-term capital gains, it would be taxed at 39.6%
- if it is long-term capital gains, it would be taxed at 20%

But not all of your profits are taxed at that rate, because it is a progressive system with marginal rates.

 

[Pekelo]

But not all of your profits are taxed at that rate, because it is a progressive system with marginal rates.

That is correct. The effective taxrate is only 31.36% on 600K, but then we have to add state and local and Obamacare, etc. Here is a handy tool to play with different states and cities:

https://smartasset.com/taxes/income-taxes#hC5keHV7DA

 

[Handle123]

That is correct. The effective taxrate is only 31.36% on 600K, but then we have to add state and local and Obamacare, etc. Here is a handy tool to play with different states and cities:

Then it better to live like in Texas where there is no state income taxes. There is real estates taxes.

 

[tradingacct1]

From what I've learned thus far in this thread and also referencing the other recent thread about the IB Founder moving to Florida for the no state income tax is that it is definitely beneficial for a trader to live in places like FL, TX, NV, and other states that offer no income tax incentives. Plus, the states themselves are good states to live in. Who doesn't want to live in FL, TX, or NV?

To add, places like California and NY have some of the highest in the nation's income tax because of their A)People's desire to live there B)Blue State Policies, and C) Size. As a trader, does it make sense to live in one of these states if your income tax will be almost a 9-10% addition to your federal?

Pekelo, thank you very much for providing complete information and direct to the point answers. After a few of the replies from the thread, I looked into the 1256 and 1256g contracts and those are the 60/40 rule being 60% are taxed at a long term capital gains rate and 40% are short term. Understanding that futures have expiration dates, this makes sense for the IRS and I applaud them for having this ruling and not charging a flat short term capital gain or counting a capital gain loss on the year. (Doing the math, Pekelo's numbers pretty much add up)

 

[wartrace]

It should be, though - the opposite of "regardless", perhaps? And by the way, warts don't race.

Wartrace is the name of the town I live near in Tennessee.

 

[tiddlywinks]

From what I've learned thus far in this thread and also referencing the other recent thread about the IB Founder moving to Florida for the no state income tax is that it is definitely beneficial for a trader to live in places like FL, TX, NV, and other states that offer no income tax incentives. Plus, the states themselves are good states to live in. Who doesn't want to live in FL, TX, or NV?

To add, places like California and NY have some of the highest in the nation's income tax because of their A)People's desire to live there B)Blue State Policies, and C) Size. As a trader, does it make sense to live in one of these states if your income tax will be almost a 9-10% addition to your federal?

Pekelo, thank you very much for providing complete information and direct to the point answers. After a few of the replies from the thread, I looked into the 1256 and 1256g contracts and those are the 60/40 rule being 60% are taxed at a long term capital gains rate and 40% are short term. Understanding that futures have expiration dates, this makes sense for the IRS and I applaud them for having this ruling and not charging a flat short term capital gain or counting a capital gain loss on the year. (Doing the math, Pekelo's numbers pretty much add up)

Just to clarify some of your thinking. The US Internal Revenue Service (IRS) does NOT write the tax code. That is done by Washington lawmakers (aka politicians).

In the case of preferential tax treatment for 1256 contracts, that was a concession back in the good 'ol days of politics. Prior to the 80's, straddles, carries, and other instruments had tax loopholes used by traders to zero out or even produce loss on what were essentially profitable trades. Dan Rostenkowski from IL (where is the CME is located??), Chairman of the House Ways and Means Committee, was instrumental in getting the preferential tax treatment, a concession for eliminating other loopholes, passed into law.

Today, every year or two, the 1256 preferential tax treatment comes up for possible elimination or modification, as a way to fix or offset the "tax gap".