This is Mr. Daniel. Welcome to this week’s newsletter.
President Biden just crashed the stock market Thursday on news that Biden may increase the capital gain taxes from the current limit of 20% to 39.6%. This increase in tax will be used to fund education and childcare.
Why is this a big deal?
For most of the history of income taxes, long-term capital gain taxes have been lower than regular income taxes. This policy may reverse this trend. The lower capital gain tax encourages Americans to save and invest but capital gain is also used by many wealthy Americans to pay less taxes.
You may have heard that wealthy CEOs from big corporations often pay less personal taxes than lower executives. Even the famous Warren Buffet, who ranks top 5 on the world’s wealthiest list, admitted to pay less taxes than his secretary.
Many of these wealthy Americans make sure they pay primary capital gain taxes rather than regular income taxes.
Let us see how that works.
First of all, we need to know that there are many taxes a working individual needs to pay! it is absolutely crazy!
- Sales taxes (9.5%)
Sales taxes include taxes to state, county and city.
If you buy a Samsung 85” Class Q950 TS QLED 8K TV priced at $10,000, you’ll need to pay $950 in sales taxes upfront giving your total cost of purchase $10,950. Please do not waste your hard earned money this way, always try to delay gratification when possible.
- Excise taxes
These are taxes that are already included in the cost of the goods you buy, you may not even be aware of them. A great example of excise tax is the gasoline tax. You will need to pay 68.9 cents per gallon of gasoline before the sales tax. This gas excise tax is already included in the cost of gasoline you see in gas stations. If you drive diesel (diesel is oil, gasoline is a solution), the excise tax is higher. Consider driving an electric vehicle to save on taxes.
- Federal income tax:
This is the income tax that everyone must pay and these taxes are used by our Federal government to pay for maintaining our country.
For example, for a surgeon making $250,000 annually would have tiered taxes up to 35% bracket. This doctor would need to pay $47367.50 plus 35% over $207,350. This means his federal tax is $62,295 without any deductions.
- State Income Tax
This is the income tax paid to the state you live in. California has the highest state income taxes in all the states.
California has the highest state tax with a 12.3$ rate. If you make more than $1 million, then you have to pay 1% additional mental health tax, bringing the tax rate to 13.3% as the top rate.
The top 10 highest income tax states (or legal jurisdictions) for 2020 are:
- California 13.3%
- Hawaii 11%
- New Jersey 10.75%
- Oregon 9.9%
- Minnesota 9.85%
- District of Columbia 8.95%
- New York 8.82%
- Vermont 8.75%
- Iowa 8.53%
- Wisconsin 7.65%
The same California surgeon making $250,000 will be paying both $62,295 Federal and $20,378.64 State income taxes. A total Income tax of $82,673.64 means that the Californian surgeon’s take home pay is reduced to $167,326.64 without any deductions.
- Capital gain tax
Long term capital gains (investment you hold longer than 1 year) are taxed according to the income bracket below (0%, 15% and 20%). As you can see, these long term capital gain taxes are much lower than regular income taxes. Wealthy Americans maximize their income from long term capital gains instead of regular incomes. This is one of the main reasons they pay less taxes than regular working American without little or no capital gains.
So our California surgeon making $250,000 a year has a tax liability of $82,673.64 in the example above.
Let’s say a young savvy real estate investor made $400,000 in the same year solely from selling his single family home as his primary residence. He is excluded up to $250,000 in gains from any taxes. The rest of the $150,000 in gain will be taxed as long term capital gain at 15%. This means that the young savvy investor only has to pay $22,500 (15% of $150,000) in taxes. In other words, the young investor made more money, paid less in taxes than the hard working surgeon in that year.
- Property tax
Property tax is a tax levied by the government on real estates. You have to pay tax on your home regardless if you own the home outright (no mortgage) or not. In other words, you never really own your home or the land your house is built on. If you do not pay property tax or is late in payments, your home will be sold through a tax sale in 5 years.
One interesting quirk about property tax is that it falls under local, not state, jurisdiction. The county with the highest property tax is Essex county, New Jersey, around 2.21%. This means that if you bought your first house for $600,000, you’ll need to pay 2.21% of $600,000 or $13,260 every year! Here in Los Angeles county, property tax average is around 1.16%.
- Estate tax
These are tax levied on assets parents leave to their heirs after death. Yes, you may need to pay more taxes after death!
Good news! There is an $11.58 million tax exemption per person. This means that when a person dies, he or she can leave $11.58 million to their heirs (children) without any tax burdens on their heirs! Anything more than $11.58 million will be taxed at 40% top tax rate. You need to make a lot of money in the first place to worry about Estate taxes.
Benjamin Franklin said there were only two things certain in life: death and taxes
Oliver Wendell Holmes, former Justice of the United States Supreme Court, said, “Taxes are what we pay for a civilized society.”
There are no gains without pains!
Interested in taxes or helping people save on taxes?
Consider a career in law and accounting!
If you are math savvy and are interested in finance, one of the great career options is become a lawyer or an accountant or both. In college, you can learn about accounting principals like asset, liability classifications and preparing financial statements. You can also learn about business management, finance and economics. You can major in Finance and specialize in applied economics, real estate or entrepreneurship. There are many combinations depending on your interests and goals.
After 4-year college, you can take the LSAT (law school admissions test) to get into a 3-year law school and also finish the Uniform CPA exam with 1800 hours internship experiences to get a CPA license. This means that you will be both a lawyer and a CPA. You may be 25-26 years old, about the same age as a doctor finishing his/her residency and officially start practicing medicine.
Law and accounting work very well together. Big law lawyers (lawyers who work for extremely high revenue law firms on corporate mergers and acquisitions) with accounting backgrounds are among the toughest and highest paid jobs out there.
Keep your options open in college and learn as much as you can!
Stay safe and well,
在所得稅歷史上的大多數時間裡，長期資本利得稅一直低於常規所得稅， 這項增稅政策可能會扭轉這一趨勢。 較低的資本利得稅鼓勵美國人進行儲蓄和投資，但是許多富裕的美國人也利用資本利得繳納更少的稅。
您可能已經聽說過，大公司中富有的CEO所繳納的個人稅通常比低管人員要少。 甚至在世界上最富有的榜單上排名前5位的著名的沃倫·巴菲特（Warren Buffet），也承認比他的秘書少交稅。
如果您購買價格為10,000美元的三星85英寸Q950 TS QLED 8K電視，則需要預先支付950美元的銷售稅，從而使購買總費用達到10,950美元。 所以請不要以這種方式浪費您辛苦賺來的錢，請盡可能嘗試延遲享樂。
這些稅已經包含在您購買的商品的成本中，您可能並不知道它們。 消費稅的一個很好例子是汽油稅，您需要支付每加侖汽油68.9美分的稅費。 您在加油站看到的汽油成本中已經包含了這種汽油消費稅。 如果您駕駛柴油（柴油是石油，汽油是解決方案），則消費稅會更高。 考慮駕駛電動汽車以節省稅金。
例如，對於一個年薪25萬美元的外科醫生，稅率最高可達35％。 該醫生需要支付47367.50美元，加上207350美元的35％。 這意味著他的聯邦稅為62,295美元，沒有任何可以抵扣稅款。
長期資本收益（您持有超過1年的投資）根據下面的收入等級（0％，15％和20％）徵稅。 如您所見，這些長期資本利得稅遠低於常規所得稅。 富裕的美國人從長期資本收益中獲得了最大的收入，而不是經常性收入，這是他們比沒有工作或幾乎沒有資本收益的正常工作的美國人少繳稅的主要原因之一。
假設一位年輕精明的房地產投資者在同一年僅靠出售自己的獨棟自住房屋就賺了40萬美元， 他可以獲得不包括任何稅項的最高25萬美元收益，剩餘的150,000美元收益將以15％的長期資本收益來徵稅。 這意味著精明的年輕投資者僅需支付22,500美元（150,000美元的15％）的稅。 換句話說，年輕的投資者比那年辛勤工作的外科醫生賺了更多的錢，繳的稅也比較少。
財產稅是政府對房地產徵收的稅。 無論您是否擁有房屋（無抵押），都必須繳納房屋財產稅。 換句話說， 如果您不繳納財產稅或延遲付款，您永遠不會真正擁有自己的房屋或房屋所在的土地，並且您的房屋將在5年內通過稅收出售。
關於財產稅的一個有趣的現象是，它屬於地方管轄權，而不是州管轄權。 財產稅最高的縣是新澤西州的埃塞克斯縣，約佔2.21％。 這意味著，如果您以$ 600,000的價格購買了第一套房子，則每年需要支付$ 600,000的2.21％或$ 13,260！ 在洛杉磯縣，這裡的財產稅平均值約為1.16％。
好消息！ 每人免稅額為1158萬美元。 這意味著當一個人去世時，他或她可以將1,158萬美元資產留給他們的繼承人（子女），而繼承人沒有任何稅收負擔！ 超過1158萬美元的部分，則將按最高稅率40％的稅率徵稅。 首先，您需要賺很多錢才會擔心遺產稅。
美國最高法院前大法官奧利弗·溫德爾·霍爾姆斯（Oliver Wendell Holmes）說：“稅收是我們為文明社會付出的代價。”
如果您精通數學並且對金融感興趣，那麼最好的職業選擇之一就是成為律師或會計師，或兩者兼具。 在大學裡，您可以了解諸如資產，負債分類和準備財務報表之類的會計原則。 您還可以了解有關業務管理，金融和經濟學的知識。 您可以主修金融專業，專門研究應用經濟學，房地產或企業家精神。 有很多組合，取決於您的興趣和目標。
四年制大學畢業後，您可以參加LSAT（法學院入學考試）進入三年制法學院，並以1800小時的實習經驗完成統一CPA考試，以獲得CPA執照。 這意味著您將既是律師又是註冊會計師。 您的年齡可能在25-26歲之間，與完成住院醫生實習並正式開始從事醫學工作的醫生年齡相同。