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Bonus or base salary more important?


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Hi everyone,

 

I'm in negotiations with an Indian Health Service hospital emergency department for my first job. I am contemplating asking for a higher base salary and offering to accept a smaller bonus (or none at all). My reasoning behind this is because I've been told that bonuses are taxed very highly plus I want my first job's pay scale to be as high as possible for better negotiating position in subsequent job searches later in my career.

 

Any thoughts or suggestions? Thanks!

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Hi everyone,

 

I'm in negotiations with an Indian Health Service hospital emergency department for my first job. I am contemplating asking for a higher base salary and offering to accept a smaller bonus (or none at all). My reasoning behind this is because I've been told that bonuses are taxed very highly plus I want my first job's pay scale to be as high as possible for better negotiating position in subsequent job searches later in my career.

 

Any thoughts or suggestions? Thanks!

Bonuses of less than $1 mil are taxed at 25% regardless of your income.  The IRS considers your bonus to be supplemental  

 

The marginal tax rate for income earned over $90k for a single filer is 28% though....  So if you make more than $90k after deductions your extra salary would be paid at a higher tax rate.  (If you are married that tax rate after deduction kicks in at ~$150k).  The tax rate under $90k for single filer: 25%

 

If you own a house or have significant student loan interest to deduct it will be a wash one way or the other from a tax perspective.  if you are married it is a wash unless your spouse and you earn more than $150k after adjustment.

 

 

Thats the tax side of it.  The answer to the rest of your question is hard to know without information about how much your bonus would be, what you could reasonably expect to get in extra salary, etc.  Just remember that your bonus probably doesn't compound with yearly raises...

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  • 2 weeks later...

Your unabashed, hyper-focused fixation on money is fascinating.  Why are you wanting to get into medicine?  Go into finance and make some money, you'll be happier

I was just asking if someone knows of any strategies....to pay less tax on income earned.  

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There are too many variables to provide a succinct answer for minimizing your tax obligation.  It can depend on your filing status, dependents, deductible expenses, retirement contribution options, other sources of income, primary source of income (W-2 employee or 1099 or Corp2Corp), level of income relative to your filing status, assets, and so on and so on.  It also depends on how much of your own time you want to put into it.  And of course, there's timing of income recognition for taxability (typically via retirement savings vehicles) and playing the 'most likely' for future expectations.  

 

Hence the earlier answer:  Consult a good accountant / financial advisor.  There's more than tax liability in play.  Make a financial plan.  Follow the plan.  Revisit the plan every 3-5 years in case the premise(s) of the plan have changed.  Enjoy your life and your career in the meantime.  

 

That being said, I wouldn't consider it fixation on money so much as I would optimization.  There's certainly no reason to pay more taxes than you must, any more than you should pay more interest than is necessary.  Too many people blithely ignore tax ramifications in their personal finances (or assume they have no control?).  And FWIW, I do have a business degree (a couple of them).  

 

Bottom line, consult a professional.  I wouldn't get my medical advice from my financial advisor ... so ... 

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.  

 

That being said, I wouldn't consider it fixation on money so much as I would optimization.  There's certainly no reason to pay more taxes than you must, any more than you should pay more interest than is necessary.  Too many people blithely ignore tax ramifications in their personal finances

 

My reply to Sunnyn wasn't directed at that specific post, but the fact that nearly every post that he/she makes is about money.  I am not the first to note this either.   

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  • 2 weeks later...

To get back to the original question asked in this thread, it really depends on what raises will look like in the long term.

 

An $80,000 salary with annual 3% raises becomes $107,513 after 10 years.  Will a bonus increase that much over the long term?

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