One reason I don’t like working in California much is because they have such a high rate of state income tax. With my income range, I have to pay 9.3% in state income taxes. This is especially annoying when my residential state is Florida. Depending on the state, I can often get some of those state incomes taxes back when I file my taxes.
To avoid having to pay 9.3% of my income in CA state income taxes, I have devised a plan. I decided to front load my 401k and max it out during the 3 months I will be working in California. This means I will be contributing 50% of my income to my 401k each week. I will be able to max out the 19,500 allotted contributions by the time I finish my assignment here.
So instead of having to pay $300 of taxes to the state of CA each week, I only have to pay: $70. I won’t owe more state income taxes at tax time because technically my overall taxable income while working in California is the total amount after my 401k contributions.
Obviously, this hack comes at a cost. Since I am contributing 50% of my income to my 401k, my paycheck will be significantly lower than usual. Fortunately, my costs are low and I can still afford to live off of this lower take home pay.
Have you ever tried such a hack before?
I want to enter into traveling is there difficulty with having steady work? Is it best to take 13 week contracts? I am family practice and UC
Hi yes there is steady work usually 3 months. I recommend having multiple state licenses to increase your job options. Especially having one in Ca
Hi I just completed an assignment in cali and had to work as an “employee” of the agency not as a contractor due to the AB5 law that went into effect last year. Does this not affect you while on assignment in cali?
Yes I discussed that in this post: http://travelingnp.com/2020/12/18/california-ab5-bill/
and http://travelingnp.com/2021/02/16/contemplating-my-next-assignment-part-2/