Lawyers are well-compensated for their work. The average salary for lawyers in 2012 was $130,880, according to the U.S. Bureau of Labor Statistics. The job outlook is only fair, with a projected growth rate of 10 percent through 2020, less than the average for all occupations. Multiple factors affect what a lawyer actually puts in her pocket at the end of the year, such as geographic location, work setting and income tax rates
Salaries Vary Widely
The average annual salary of lawyers in Montana was $74,130, according to the BLS, while the District of Columbia paid $165,590. Although most lawyers worked in the legal services field, with an average annual salary of $137,180, the next largest group worked in state government and earned $82,750. Lawyers in insurance and employee benefit funds earned $148,270 and those who worked for the federal executive branch took home $130,710. Only 110 lawyers reported working for the securities and commodity exchanges, with an average annual salary of $181,980. Lawyers who worked in physicians’ offices earned the most in the profession, with an average annual salary of $241,870.
Location and Tax Liability
Lawyers must pay income tax on monies such as tips, pensions, annuities, gambling winnings and federal payments as well as salaries and wages, according to IRS Publication 505. In addition to federal taxes, income taxes vary by state. At the time of publication, Alaska, Nevada, Washington, Wyoming, South Dakota, Texas, Tennessee, Florida and New Hampshire did not have a state income tax, according to financial website Kiplinger.com. California, which Kiplinger's describes as one of the least-friendly states in terms of taxes, had income taxes ranging from 1.0 to 13.3 percent. New York was another state with relatively high income taxes, according to Kiplinger's, ranging from 4 percent to 8.82 percent.
Marriage and Taxes
Tax brackets change periodically. An October 2013 article in Forbes magazine reports that new tax brackets were implemented by the IRS for 2014. Assessed taxes are affected by marital status and whether the taxpayer files jointly with a spouse, separately or as head of household. A lawyer who files as single, for example, and earns the average salary of $130,880 reported by the BLS in 2012, would pay $18,193.75 plus 28 percent of the excess over $89,350, according to Forbes. A married lawyer filing jointly would pay $10,162.50 plus 25 percent of the excess over $73,800, as long as the couple’s combined income did not exceed $148,850. (ref 5)
The variables involved in calculating tax liabilities are numerous and complex. Lawyers who have dependent children, for example, will pay a different amount of tax than lawyers who are childless, even though both earn the same salary. The choice to itemize or take a standard deduction affects tax liabilities. Tax brackets also change as a lawyer earns more or less. Lawyers who earned the high-end salary of $241,870, for example, would pay income tax of $45,353 plus 33 percent of the amount over $186,350 if filing singly, according to “Forbes.” Lawyers in Montana, however, with an average annual salary of $74,130, would pay $5,081 plus 25 percent of the amount over $36,900 if filing singly. (ref 3, 5)