[uwuhn]

>It was surprising to learn that below like $50k you basically pay 0 in income tax in California.

Not if you're a contractor without a full-time employer. In college I did freelance work, and I lost nearly 30% to taxes despite making less than $5k a year from my work. Having your social security responsibility doubled is brutal.

[skybrian]

The original post was talking about income tax. There are plenty of other taxes on making money by working.

But, if you're living solely off investments you don't pay those. I was surprised to see that capital gains tax is zero below a certain income. It seems rather unfair, since you can choose when to sell.

[sjdb77]

Yeah...seems to incentivize day trading.

[icedchai]

Not really. It's only zero on long term capital gains if total income is below a certain threshold.

[sjdb77]

Isn't short term cap gains taxed like earned income, which below $50k a year is 0 in CA? For federal if you make <$52k (w/ standard deduction) you only pay like a 11% tax rate.

[beefalo]

No it has it's own tax bracket and there is no 0% bracket

[sjdb77]

Ok got it - yeah looks like it's around 4% with a $4k standard deduction.

[sjdb77]

I'm not familiar with how freelancing income is different than other forms of income...isn't that just a regular 1099? Are you saying you didn't receive a tax refund during tax season?

[anonuser123456]

1099 income you pay full amount of payroll tax. W2 your employer kicks in 1/2.

[icedchai]

You need tax deductions: expenses, SEP IRA contributions, home office space, utilities, etc.. You'll get that 1099 income down real quick.

[mrfredward]

With W2 employment, you and your employer split the payroll tax responsibility. When you're self-employed, you pay both halves.

If you adjust your rates accordingly, it's a wash for everyone involved (this is one of many reasons the 1099 price per hour should be around twice the W2 price per hour).

None of this has anything to do with CA income tax.

[diminoten]

You lost that because you didn't file for a tax return correctly...