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If you make more than $150,000 a year, you’ll definitely rank high among earners in the US, but that doesn’t automatically mean you’ll be crushed by taxes. What changes at this level is complexity.
Phase-outs begin, additional taxes kick in, and certain compensation structures can quietly increase your tax bill if not planned for in advance.
The problem isn’t that those making six-figure incomes are universally overtaxed.
When income increases, mistakes become more expensive, and uncoordinated decisions about equity compensation, payroll taxes, retirement accounts, investments, and state residency can create avoidable tax burdens.
The following issues do not affect everyone equally, but are important for the right person.
If some of your compensation comes in the form of Restricted Stock Units (RSUs), there is a legitimate withholding issue that catches many professionals off guard.
When RSUs vest, their value is taxed as ordinary income. Most employers withhold a flat 22% withholding for federal taxes, regardless of your actual marginal rate. For someone making about $150,000, the federal marginal rate is 24%, not 37%. What happens next depends largely on where you live.
In a state without an income tax, such as Texas or Florida, the combined marginal tax on RSU income is typically closer to the 28%-31% range when federal income tax, Social Security, and Medicare are included.
In California, the picture is very different. Here are the faces of a single filer who earned nearly $150,000:
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24% federal marginal income tax
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~9% California marginal income tax
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6.2% Social Security tax (up to wage cap)
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1.45% Medicare tax
This brings the combined marginal rate of increased income closer to 40%. California also imposes a State Disability Insurance (SDI) tax of roughly 1.2%, which could push the real marginal burden on wage-based income into the low 40% range.
Although not all income is taxed at this top marginal rate, this like that Rate applicable to additional dollars such as RSU vesting; making proper withholding and estimated tax planning especially important for those earning in California.
The withholding tax gap is real. If you receive a large RSU grant, the difference between the amount withheld and the amount actually owed can easily turn into several thousand dollars owed at tax time.
There’s also a secondary effect that many people overlook: Large RSU qualifying events can push total revenue over $200,000; This is where additional taxes begin to increase, including the 3.8% Net Investment Income Tax on certain investment income and the 0.9% Additional Medicare Tax on income earned above this threshold.
Payroll taxes add another layer of nuance that is often overlooked.
Social Security tax applies only up to the wage cap (about $184,500 in 2026); This means that income above this level is no longer subject to the 6.2% employee share.
However, the Medicare tax applies to all income earned without any cap, and an additional 0.9% Medicare surtax applies when wages exceed $200,000 for single filers.
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This additional tax doesn’t apply to someone making exactly $150,000, but bonuses or RSU income can quickly push total wages over the threshold and increase the real marginal rate on those dollars.
This is another reason why equity compensation planning becomes more important as income moves into the mid-six figures.
Incentive Stock Options (ISOs) are a separate issue and not something every $150,000 earner should worry about. But if you get ISO, the Alternative Minimum Tax (AMT) could create a very real surprise.
Exercising ISOs does not trigger regular income taxes, but the difference between the exercise price and market value counts as income for AMT purposes even if you do not sell the shares. This could result in a tax bill on gains that only exist on paper.
AMT rates are 26% or 28%, and the exemption phases out as income increases. For those earning close to $150,000, AMT exposure depends largely on the size of the ISO exercise and total income in that year.
Larger grants or concentrated applications can still result in five-figure tax bills without careful planning.
Most high-income earners do the right thing by maxing out their 401(k), but they stop there without realizing that additional planning opportunities exist.
Depending on your situation, these may include:
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Backdoor Roth IRAs
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Mega Backdoor Roth contributions (if your plan allows)
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Health Savings Accounts (HSAs)
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Solo 401(k)s for side income
An important update under SECURE 2.0: Starting in 2026, high earners (those with prior-year FICA wages over $150,000) must make catch-up contributions on a Roth basis rather than on a pre-tax basis.
This is changing the planning calculus of people in their 50s, making coordination between tax and retirement strategy more important than ever.
HSAs remain one of the most powerful but underutilized tools available, offering deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
Most high-income earners invest in retirement accounts and taxable brokerage accounts, but far fewer think carefully about which assets belong where.
Tax-inefficient investments such as bonds, REITs, and high-dividend funds generally belong in tax-deferred accounts. Tax-efficient growth assets generally make more sense in taxable accounts where long-term capital gains rates apply.
Because future gains in value are never taxed, Roth accounts are typically reserved for the highest-growth assets.
This isn’t about chasing returns: it’s about reducing unnecessary tax burdens. The right asset location over time can significantly improve after-tax results without increasing risk.
State income taxes are important, but they vary widely by income level and location.
While top earners in states like California, New York and New Jersey face the highest marginal rates, someone earning $150,000 will generally pay less than the top-tier group but still be materially more than their peers in states without the tax.
Even small differences in state tax rates can add up to significant dollars in the long run. For those considering relocations, job changes, or multi-state work arrangements, timing and residency rules become critical to avoid paying taxes incorrectly or twice.
What these problems have in common is not overtaxing those making $150,000; taxes become interconnected. Stock compensation, payroll taxes, retirement rules, surtaxes, investment placement, and government residency interact in ways that are not obvious without forward planning.
This is where DIY approaches tend to break down. Filing correctly is not the same as doing strategic planning.
If some of these scenarios apply to you, or may apply as your income increases, a qualified financial advisor can help you understand which rules are important to your situation and which are not.
SmartAsset offers: Free advisor matching tool that connects you to trusted, pre-screened advisors who work with high-net-worth professionals. You answer a few questions, review up to three advisor profiles, and schedule introductory calls to see who’s a good fit.
If you make more than $150,000, the goal isn’t to panic about taxes; It’s about understanding taxes well enough to have your income quietly roll away from year to year.
This article Did You Earn More Than $150,000? You May Be Paying Too Much Tax Without Realizing It originally appeared Benzinga.com
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