Understanding How Taxes Impact $100,000 Salaries Across 20 States
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Chapter 1: The Reality of Six-Figure Salaries
For many professionals, earning a six-figure salary is a significant achievement. Employers often promote these compensation levels for managerial and executive roles. However, the discussion often overlooks the impact of taxes. The tax system in the U.S. tends to burden the working class more than it does the wealthy elite. This raises an important question: how much of that six-figure salary actually makes it into the employee's pocket after federal and state income taxes are deducted?
Let's delve into how taxes diminish six-figure salaries across 20 states.
The following points are essential to note:
- The amounts listed reflect what remains after federal and state taxes.
- Each state has different tax rates. Notably, Alaska and Florida do not impose state income taxes.
- Local income taxes may further decrease take-home pay, and these rates are also considered.
The data presented originates from MoneyWise in 2021.
Section 1.1: Salary Breakdown by State
Alabama — $72,123
State income tax is approximately 3.97% of the $100,000 salary, with a local tax of 1% in Birmingham.
Alaska — $75,898
No state or local income taxes, showing the amount after federal taxes.
Arizona — $73,396
State income tax takes 2.7%, with no local taxes.
Arkansas — $70,314
The state taxes 5.78%, and local income taxes may apply in school districts.
California — $68,332
State tax is about 6.76%, with no local taxes.
Colorado — $71,760
The state takes 4.34%, with local taxes applied in some cities.
Connecticut — $70,872
State income tax is 5.22%, with no local taxes.
Delaware — $70,837
Delaware taxes 5.26%, and Wilmington has a local tax of 1.25%.
District of Columbia — $69,548
The income tax is 6.55%, with a progressive local tax system for higher earners.
Florida — $76,096
No state or local taxes; this reflects the amount after federal taxes.
Georgia — $70,586
The state tax is 5.51%, with no local income tax.
Hawaii — $68,587
High state tax at 7.23%, with no local taxes.
Idaho — $70,546
State tax is 5.5%, with no local taxes.
Illinois — $71,253
State tax is 4.95%, plus a local income tax of 4.84%.
Indiana — $72,898
State taxes take 3.2%, with a county tax of 2.86%.
Iowa — $70,320
The state subtracts 5.78%, plus local taxes in school districts.
Kansas — $71,152
The income tax is 4.94%, with no local taxes.
Kentucky — $71,230
The state tax is 4.87%, but local taxes may apply in various cities.
Louisiana — $71,690
The state tax is 4.41%, with no local taxes.
Maine — $70,042
The state tax is 6.05%, with no local taxes.
Section 1.2: Key Takeaways
It's a common refrain that California is a costly state to live in, yet Hawaii's tax situation was unexpected. This may be attributed to its geographical isolation and reliance on tourism.
It's important to remember that these six-figure salaries face additional reductions. Residents must spend on essentials like food and fuel, incurring state and local sales taxes. Moreover, lifestyle inflation can arise from housing choices, utility costs, subscriptions, and other personal expenditures like childcare.
Thank you for engaging with this analysis.
Chapter 2: Additional Insights on Capital Gains and Taxes
To further understand the tax landscape, consider the following video:
How to Pay 0% Capital Gains Taxes Making $100,000/year | Early Retirement Guide
This video discusses strategies to legally minimize capital gains taxes, especially for those earning around $100,000 annually.
Another crucial aspect is the impact of income on taxes.
Why Your Taxes SKYROCKET After 100k Of Income...
This video explores the reasons why tax burdens increase significantly once income surpasses the $100,000 mark.
Data Reference:
Source: How income taxes shrink a $100,000 salary in all 50 states.
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