After federal & state taxes (especially in New York) and your other deductions you can turn $125,000 a year into $65,000 real quick.
sands, is it not that something is not right here?
If you mean do I think it's not right as in "the system" then yes. I think its messed up. Why the government needs that much of your money I will never understand. And how you can take six figures and turn it upside down into almost 1/2 of its original value is another magic trick that I'd like to congratulate Uncle Sam on accomplishing.
Ok, maybe I am missing something.
125k puts me in the 28% tax bracket. Plus 3% for Illinois state income tax = 31%
so 69% of 125k is about $7100 per month....
As opposed to the $1800 or so per month that I used to make with $30k per year. That's a hell of a difference and it still sounds pretty good to me.
Widwest, please allow me to correct the slight miscalculation of a fellow law student.
You are correct about the 28% tax bracket, but incorrect in the full application of the 28% tax bracket.
Let's assume that we're all geniuses and also assume that we get very lucky and we all end up at Cravath as a 1st year associate in the heart of Big Law Capital (aka - New York City).
We all start at $125,000 a year.
(so far so good)
Oh but then comes in Uncle Sam. (not good) and Sam says congrats kid, you're now in the 28% tax bracket, which means give me $14,325 OFF TOP...PLUS
28% of everything you make above $70,350.
Everything we make above 70,350 is 125,000-70,350 = 54,650. 28% of 54,650 = $15,302.
Now when you add our $15,302 to what we originally had to give off top according to the tax bracket we're in ($14,325) we get $15,302 + $14,325 = $29,627. Let's just call it 30k.
So now, already, the Feds have hit us up for 30k off the top. That takes our $125,000 to $125,000-$30,000 = $95,000. AND WE HAVEN'T EVEN GOT TO STATE TAXES YET.
So, not to be outdone, here comes Mr. State of NY and he says, oh good job kid, I see you're a new corporate lawyer making $125,000 of taxable income, why don't you give me $6,532 off top PLUS
8.54% of anything you make over $100k. Add all that mess up, that equals another $8,667, let's just call it 9k.
So take our $95,000 and take away another 9k and we have $86,000 as take home....
...Oh but wait, this is all assuming you have $0.00 in a 401k, mutual funds, IRA's, health care deductions, dental plan, optical plan, and other benefits. The average person throws in 10% to a 401k ($12,500), which would take $125,000 down to $112,500. Assume all the other deductions round us out to an even 105k, and then we have to do the whole Fed Tax & State Tax thing all over again. All of that mumbo jumbo brings our take home salary to somewhere around $74,000
Now you see how we can go from $125,000 a year down to $74,000 a year.
However, on a positive note, this is all TAKEHOME. So you divide $74,000 by 12 months, and you're looking to take home over $6,000 a month. That's 6 G's in your pocket each month.
I don't know about you, but that still sounds pretty good to me considering my take home before coming to law school was about 1/3 of that.