Forgive what’s likely a naive Partner tax question. Im a Director and live in WA state, where there’s no state income tax. From my understanding the partnership pays taxes in all 50 states, presumably based on revenues earned in each state. Is there a rough blended state tax assumption (or just total tax burden, including fed) for partner pay? Trying to build a framework for evaluating my W2 income vs what it’ll (hopefully) be one day as K1.

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Go with 45-50% total tax burden. A majority of the firm income is apportioned to the high tax states (eg, NY, CA, MA, etc) and you have self employment taxes, plus no firm subsidy for health insurance (you pay full price and get a deduction for the premiums).

This question always gets asked and there is so many variables (for example, you fund the wealth builder and other retirement accounts) you end up focusing on cash flow instead of tax burden.

If you want a good answer specific for WA, ask your sponsor or RL and they should be happy to talk you through the basics.

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Thanks for the advice!

Tax burden in year 2 is like getting choked out in a UFC match while you’re already behind and fighting for air

funny

lol at this analogy. So in all seriousness though, I guess year one comp is less affected. Then year 2 (at 15 months) is where you feel the pain?

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