I make $25.70 an hour and as a nurse, I can work as much overtime in my schedule as I want. I never really figure up my own pay checks, and someone told me if I work more than 1 extra shift, it throws me into a highter tax bracket and I may as well work for free because taxes suck it all up. Is this true?
2006-08-02 14:31:19 · 5 answers · asked by happydawg 6 in Business & Finance ➔ Careers & Employment
Yes and no.
Earning more will put you in a higher marginal tax bracket, i.e., the tax rate on the incremental dollars you make will be higher, but the tax on the "normal" earnings will stay the same.
If you need more income, work some overtime. Incremental tax rate will go up only a few percentage points.
2006-08-02 14:36:09 · answer #1 · answered by TheSlayor 5 · 2⤊ 0⤋
The answer is no, you never wind up paying more in taxes than you earn in overtime pay.
Look at the tax tables in the back of the instruction book for the 1040 form. You will NOT find a point where the additional tax is more than the step up in income. Here's why:
The tax brackets never apply to your entire income, the only apply to the income you earn OVER AND ABOVE the maximum for the previous bracket. Here's an example using simplified numbers:
For a person with a 25,000 income:
First $10,000 - $0 tax
Next $15,000 - 10% tax - $1,500 tax
Total Tax: $1,500
Net Income: $23,500
For a person with a $30,000 income:
First $10,000 - $0 tax
Next $15,000 - 10% tax - $1,500 tax
Next $5,000 - 20% tax - $1,000 tax
Total Tax: $2,500
Net Income: $27,500
2006-08-02 21:35:39 · answer #2 · answered by Jay S 5 · 1⤊ 0⤋
You really need to talk to a tax professional, but I think you can do some basic math. Let's say you're in the 25% tax bracket. If you add one extra shift per week, multiply the total pretax income (after deductions for medical insurance, 401(K) etc.) x 52 weeks. That will give you your annual taxable income using the extra shift. If the new salary raises you to 30%, you need to calculate how much more taxes you would pay in dollars. I don't think you are working for free, but if you have extra expenses for the extra shift (ie parking, lunch, day care), it might not be worth it.
2006-08-02 21:38:53 · answer #3 · answered by rcb26 4 · 0⤊ 0⤋
No it's not true. You may end up in a higher tax bracket, but there is no 100% tax bracket. The highest one is around 38%, so that's the most you'd pay for the overtime money. Your regular pay is still taxed at your regular rate.
2006-08-02 21:39:47 · answer #4 · answered by benellis47 1 · 0⤊ 0⤋
Afraid so
2006-08-02 21:35:16 · answer #5 · answered by Janet K 4 · 0⤊ 0⤋