Why $150K/Year Feels Broke: The Tax Math Nobody Shows You

If you make $150,000 per year, congratulations. You're officially in the top 10% of earners in America. You've made it. You're crushing it. You should be driving a nice car, living in a nice place, and stacking cash every single month.

But you're not. Something feels off. You're making more money than you've ever had in your life, but somehow you still feel broke.

Here's the thing: It's not your fault. You're not bad with money. You're not irresponsible. You didn't buy too many lattes.

The truth is, you've been set up. The system, the tax code, the financial advice you've been given, the entire playbook you've been following—it's designed to extract wealth from people like you. High earners who work hard, follow the rules, and never quite get ahead.

I've sat across from hundreds of people just like you—doctors, engineers, tech workers, lawyers—making $150,000, $200,000, sometimes even $300,000 or more per year. And they all ask me the same question:

"Where is all my money going?"

So today, I'm going to show you exactly where it's going—and more importantly, how to stop the bleeding.

The Exact Math: Where Your $150,000 Actually Goes

Let's run the numbers because once you see this, you can't unsee it.

You make $150,000 gross—that's the number you told your parents when you got the job. That's the number you see on LinkedIn. But here's what actually happens to that money before you ever see a dime.

Before Your First Purchase

Deduction	Amount
Federal Income Tax	~$28,000
State Income Tax	~$12,000
FICA (Social Security + Medicare)	~$11,475
Total Taxes	~$51,500

Your $150,000 is now $98,500—and you haven't bought a single thing.

But wait, we're not done:

• Health insurance: $500-800/month if covering a family → $6,000-9,600/year
• 401(k) contribution: Maxing out at $24,500 → doesn't hit your checking account

Result: Your $150,000 salary becomes somewhere between $65,000-75,000 in actual take-home pay. That's roughly $5,500-6,200 hitting your bank account every month.

Where That Money Goes

Now let's look at where that $5,500-6,200 actually goes:

• Housing (in major metro where jobs are): $3,000/month → 50% of take-home
• Transportation: $1,000/month (car payment, insurance, gas, parking)
• Food: $1,200/month (groceries + eating out because you're working long hours)
• Student loans: $400-800/month
• Child care (if applicable): $1,500-3,000/month per child
• Basics: $500-800/month (phone, internet, subscriptions, clothes, gifts)

Total: $6,000-8,000/month without doing anything extravagant—no exotic vacations, no designer clothes, no bottle service. You're just living.

And this is why $150,000 feels broke. You're not overspending. You're being extracted from both ends. The government takes half, and the cost of living takes the rest.

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Why the Tax Code Is Designed Against W2 Employees

Here's where it gets really frustrating. While you're getting crushed by taxes, other people making the exact same income—or even more—are paying far less.

Let me explain how the tax code actually works because nobody taught you this in school.

The US tax code is over 70,000 pages long. You know how many of those pages were written to help W2 employees like you?

Maybe a few hundred if that.

The standard deduction, the child tax credit, a handful of education credits—that's essentially it. The rest was written for business owners, real estate investors, and people who understand how wealth actually works in this country.

The Same Income, Completely Different Rules

Let's say there are two people, both making $150,000 per year:

Person A: Software engineer at a tech company, W2 employee. Their only tax strategies are maxing out their 401k, taking the standard deduction, and maybe contributing to an HSA. Total tax bill: ~$40,000.

Person B: Consultant who formed an S-Corp. They do the exact same work, maybe even for the same company as a contractor, but because they're structured as a business, they have access to an entirely different playbook:

• Pay themselves a reasonable salary of $80,000 and take the remaining $70,000 as distributions → saving $10,710 in self-employment tax
• Deduct actual home office square footage (not just a tiny credit)
• Deduct phone, internet, computer equipment, professional development, travel, 50% of business meals
• Set up Solo 401k and contribute up to $72,000 per year (nearly 3x what a regular 401k allows)
• Qualify for the Qualified Business Income (QBI) deduction: 20% deduction on business income

Result: Same income, completely different tax outcomes. Person A pays $40,000. Person B might pay $20,000 or less.

That's a $20,000 difference every single year. Over a 20-year career, that's $400,000—plus all the investment growth you missed out on. We're talking about a million-dollar difference in lifetime wealth.

They have the same income. But they have different rules.

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The Three Types of Income (And Why It Matters)

Here's something that nobody else taught you: The IRS recognizes three distinct types of income, and they're taxed completely differently.

Type 1: Earned Income (The Worst Kind)

This is your W2 wages, salary, bonuses—money you get by trading your time for dollars. And it's taxed at the highest rates: up to 37% federal plus state taxes plus FICA taxes.

You can easily lose 40-50% of every additional dollar you earn to taxes.

This is the income that most Americans have. And it's the worst kind from a tax perspective.

Type 2: Portfolio Income (Much Better)

This is capital gains and dividends from investments. If you hold an investment for more than a year, your gains are taxed at long-term capital gains rates: 0%, 15%, or 20% depending on your income.

This is already way better than the 37% top rate on earned income. A married couple can have up to $98,900 in taxable income and pay zero federal tax on their long-term capital gains.

Type 3: Passive Income (Where the Magic Happens)

This is rental income, business income where you're not materially participating, royalties, and certain investment returns. This is really where the magic happens.

Passive income can often be offset with deductions, depreciation, and paper losses. Real estate investors can show negative income on their tax returns while actually putting cash in their pockets every month.

The Bottom Line

Income Type	Tax Rate	Example
Earned (W2)	37% + FICA	Lose 45¢ of every $1
Portfolio (Long-term gains)	0-20%	Lose 15¢ of every $1
Passive	Often $0	Lose nothing—or get paid to owe

The wealthy understand this. They structure their finances to earn as little earned income as possible and as much passive and portfolio income as possible.

The difference isn't about making more money. It's about making the right kind of money.

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My Personal Story

Let me tell you why this is so personal for me.

My parents came to this country from Korea with absolutely nothing. They had a couple suitcases and a few hundred dollars. No family connections. No safety net. They barely spoke the language.

My mom and dad sacrificed everything so that their kids could have opportunities they never had.

And they did everything right. They worked hard, saved money, didn't spend frivolously. They trusted the system and did what they were told. They built a good life.

But they never built wealth. They never escaped the cycle of trading time for money. Into their 50s and even 60s, they were still worried about finances, still dependent on Social Security, and still stressed about whether they had enough.

When I started my career, I followed the exact same playbook. I got the education, got the good job, got the salary increases, checked all the boxes—and I felt exactly what I described earlier.

Making more money than my parents ever dreamed of, but somehow never getting ahead. Every single raise just meant more taxes, and every bonus disappeared into expenses.

I was running faster and faster on a treadmill, but going nowhere.

Then I started asking different questions. Instead of asking, "How do I make more money?" I started asking, "How do wealthy people actually operate?"

Not what they say in interviews. Not the feel-good stories. But what do they actually do with their money? How do they structure their income? How do they pay taxes? Where do they invest?

And then I realized: They're playing a completely different game with completely different rules—and nobody had ever taught me those rules.

Once I learned the rules and started applying them, everything changed. Today I built an 8-figure net worth—not by working more hours and not by some lucky break, but by understanding the system and working with it instead of against it.

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Your Escape Plan: 4 Moves to Escape the W2 Trap

Here's how you actually escape the W2 trap. Four concrete moves you can start making right now.

Move 1: Start a Legitimate Side Business

This is the single most impactful thing you can do—even if you keep your W2 job.

A business, even a small one, unlocks an entirely different section of the tax code. Things you're already spending money on suddenly become potential deductions:

• Home office: Actual square footage as percentage of housing costs
• Phone and internet: Business use percentage
• Equipment: Laptop, computer—deductible under Section 179
• Professional development: Conferences, courses, books
• Business meals: 50% deductible

I'm not talking about manufacturing fake businesses or fake deductions. That's going to get you in trouble. I'm talking about legitimate businesses: consulting, e-commerce, real estate, content creation.

The business has to make money or at least have a genuine profit motive. But once you have that, you're playing a different game.

Move 2: Understand Real Estate

It's the most tax-advantaged asset class in America. I'm not saying go buy a building tomorrow. I'm saying understand why wealthy people own so much real estate.

It's not just about appreciation. It's about the tax code:

• Depreciation: You can depreciate the building over 27.5 or 39 years, even while still appreciating in value. That depreciation offsets your rental income—sometimes completely.
• Deductions: Mortgage interest, property taxes, insurance, repairs, property management—all deductible.
• 1031 Exchange: Sell a property, buy a bigger one, defer all capital gains taxes indefinitely.
• Real Estate Professional Status: If you or your spouse qualify (meeting certain hour thresholds), you can use real estate losses to offset other income, including W2 wages.

There's a reason why every wealthy family owns real estate. It's not a coincidence.

Move 3: Maximize Tax-Advantaged Accounts Strategically

You've heard about 401ks and HSAs, but most people don't use them strategically.

First question: Traditional or Roth? Traditional gives you a tax break today; Roth gives you tax-free growth forever. If you think tax rates are going up (and I do), Roth becomes more attractive.

Second: HSA. If you have a high-deductible health plan, the HSA is the most powerful tax-advantaged account that exists:

• Deductible going in
• Tax-free growth
• Tax-free withdrawals for medical expenses
• After 65, withdraw for any reason without penalty

2026 limits: $4,400 individual / $8,750 family.

Third: Business accounts. If you have a side business, look at SEP-IRA or Solo 401k. Contribution limits: $72,000 per year in 2026—three times a normal 401k.

The goal isn't just to contribute. It's to contribute to the right accounts based on your specific tax situation and future expectations.

Move 4: Get a Tax Strategist—Not Just a Tax Preparer

This might be the most important of all.

Most people just use a tax preparer—someone who takes your W2, plugs numbers into software, and files your returns. That's fine, but they're not helping you. They're just reporting what already happened.

A tax strategist is different. They're thinking about your situation 12 months in advance. They're looking at your income, your investments, your business, your life changes—and making recommendations before December 31st, not after.

Questions they help you answer:

• Should you accelerate income this year or push it to next year?
• Should you make a Roth conversion?
• Should you harvest some capital losses?
• Should you form an S-Corp?
• Should you buy that equipment before year-end for Section 179 deduction?

The right answer can save you tens of thousands of dollars.

I know what some of you are thinking: "Preston, I already have a CPA." Great. But when was the last time they called you in October to discuss strategy? If the answer is never, then you have a tax preparer, not a tax strategist.

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Common Objections

"I don't have time to start a business."

Look, I totally get it—you're busy. But a consulting business based on your existing expertise can start with just a few hours per week. You don't need to quit your job. You don't need to build a huge company.

You just need something legitimate that opens up the business side of the tax code. Even $10,000 in side income with proper deductions can change your overall tax picture significantly.

"This is too complicated."

It is at first—don't get me wrong. That's why wealthy people have advisers. You don't need to become an expert in tax law. You just need to understand the concepts well enough to ask the right questions and find the right people to help you implement.

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A Few Warnings

I need you to do this right:

1. Everything I've talked about is legal. These aren't loopholes. These aren't gray areas. These strategies are written into the tax code—often intentionally to incentivize certain behaviors like starting businesses, creating jobs, and investing in real estate.

2. Don't start a fake business just for deductions. The IRS has rules about hobby losses, and they will audit you if your business never makes money and you're just using it to write off vacations.

3. Don't over-deduct. Keep receipts. Keep records. Every deduction needs documentation and a legitimate business purpose.

4. Don't listen to random people on the internet. If something sounds too good to be true, it probably is—or it's illegal.

This is about understanding the system and using the rules that already exist. You want to play the game, and you want to play it right.

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Conclusion

Making $150,000 and feeling broke isn't a personal failure. It's not because you're bad with money. It's not because you made poor choices.

It's a system failure. A failure of education. A failure of transparency. It's a tax code and financial system designed by people who understand the rules for people who understand the rules.

My parents worked their entire lives and never learned these rules. They did everything society told them to do. Work hard, save money, trust the process.

And they got exactly what the system gave them: a middle-class life, constant financial stress, and a retirement dependent on Social Security and hope.

I refuse to let that be your story.

Once you understand how the game works, you can't be taken advantage of. Once you see the rules, you can start playing by them. And once you start playing by them, wealth becomes something you can build deliberately.

Recap

1. $150,000 salary becomes $65-75K take-home after all deductions—the government gets theirs first
2. The tax code has 70,000 pages and almost none were written for W2 employees—you're playing a game with rules designed against you
3. There are three income types—earned, portfolio, and passive—they're taxed completely differently. Wealthy people structure finances to minimize earned income
4. Your escape plan: Start a business, explore real estate, maximize tax-advantaged accounts strategically, get a tax strategist who thinks ahead

Ready to implement these strategies? Join our free live master class where we go deep on advanced tax strategies for high earners—specific moves that can add over $100,000 to your net worth over time. Register at managemoney101.com/fbmasterclass.

What strategies do you want me to cover next? Let me know in the comments.