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Income Tax and Investments
The $50k is subject to the appropriate income taxes, which may include FICA taxes including the employer share if you are self employed. The after tax money can then be invested with the amount invested being the cost basis (I.e., if you invest $40k you will have a cost basis of $40k).  In future years you will have taxes due if any of those investments pay dividends (or capital gain distributions). Once you sell you will have a capital gain or loss that you will pay taxes on (or take a deduction if a loss). Now you can improve this picture if you are able to put some of your money into a retirement account (either a tax deductible or a ROTH). With retirement accounts you do not pay tax on the capital gains or dividends. If you use a tax deferred account your tax is higher but that is because you were also investing Uncle Sam's portion of your pay check.