Tax question from article I read

I was curious about something I read in Variety that makes no sense to me. Here is the link:

Ben Affleck, Matt Damon Broke After Good Will Hunting Script Sale - Variety

If I read what Ben Affleck said correctly, he stated that after the “Hunting” script sold for $600,000, he and Matt Damon split it, so each received $300,000. After agent commissions, each then had $270,000.

Here’s where I am confused. He seems to imply $160,000 was paid by each for taxes on their individual shares of the proceeds, not in total. If you agree with that from the article, here is where my confusion comes in: doesn’t that seem high? Would $270,000 yield a $160,000 tax bill? Is he mis-remembering what he actually paid? For one thing, wouldn’t the agent commissions adjust that income down?

I am not a tax expert in the slightest, but I am always fascinated by money, especially in Hollywood. Even though I know nothing about taxes, this just seems high to me. Any thoughts?

Well, each one’s net income after the commission would probably be close to $270k, since writing a fictional screenplay probably doesn’t have a lot of business expenses other than the commission. The first Federal tax each would have been to pay would be self-employment taxes of 15.3% on the first $65.4k and 2.9% on the remaining $204.6k, so that totals $15.9k. Their taxable income would have been adjusted down by half of that self-employment tax, so their Federal AGI would be about $262k.

I think they were both single with no dependents at that time, so they had a standard deduction of $4.15k and a personal exemption of $2.65k However, if they lived in CA, presumably they would have paid some CA state withholding or estimated taxes. Let’s say that the withholding for each was $24.3k (about 9% of the $270k), and that was the only itemized deduction they had. Add in the personal exemption, and you get a Federal taxable income of $235.05k ($262k - $24.3k - $2.65k) Federal income taxes would be:

15% on $25.35k = $3.8k
28% on $36.05k = $10.1k
31% on $66.7k = $20.7k
36% on $106.95k = $38.5k

which totals to $73.1k Add in the self-employment tax of $15.9k, and their total Federal tax would be $89k each.

I couldn’t find CA state tax brackets for 1997, only for 2000, and that showed a 9.3% rate on income above $37.725k. The brackets are adjusted for inflation, so the 9.3% rate would have kicked in before that in 1997. That said, I’m not sure how CA calculates taxable income, or what deductions they allow. But if we assume that the $24.3k withholding above covered CA state income tax, then their total tax bill for Federal and CA would have been $113.3k

So, the $160k may be an overestimate. That said, if they had other income, their tax bill on the additional income from the screenplay would have been higher. Additionally, if they didn’t make quarterly estimated payments, they may have had to pay penalties and interest - which would have added to the bill.

Edited to add: I also don’t know if there are any CA state self-employment taxes that they may have had to pay.

So, while $160k may be high, it may be close.