Tuesday, May 13, 2008

$14k = $7k After Taxes?

So yesterday I sent my resume off to two different job openings. Both are interesting (if not ideal). In one I was asked to state my salary requirements. After considerable research and deliberation I asked for $57,000.

Today they emailed me! I mean, granted, they only wanted me to resend my resume because they couldn't open the file I sent (drat!) but it left me almost happy that they are actively trying to view my resume.

So I decided to investigate just how much more money this would mean if I were to obtain my stated salary requirement.

I currently make $43,260. So, if I were to make $57,000 this would be about $14,000 more. Correct?

No, not so much. I went to this website which allows you to see how much your take home pay will be after taxes and other withholdings. The answer? Approximately $1519 per pay period (about $300 more).

The site isn't perfect as I actually receive a couple bucks more than it says I should and that takes into account my pension and health insurance witholdings, but I don't know, factored into annual numbers, would my $14,000 increase in income amount to only $7000?

Sorta makes me want to hate taxes even though I know they fund important things, yadda yadda yadda. I guess I would get a bigger tax refund, however, since my student loan interest can be deducted from my income and get me back into the under $55k tax group.

Of course this is all speculative as I haven't even gotten an interview. An extra $600 bucks a month would be nice though. A girl can dream....


Jim ~ mydebtblog.com said...

You may feel as though you're being taxed more, but you're actually giving the government more money most likely. I try to avoid getting a large tax return because that would be loaning the government money I could use now. Try to bump up the amount of your withholding based on how much interest you could deduct for your student loans, $2500 is the cap on that. I bet you could keep an extra $200 a month if you do it right.

The other things throwing your numbers off are the items taken out pre-tax. A pension isn't funded by you, just the company, most likely you're referring to a 401k (company can match you) which you can make contributions. Any insurance, health, dental, vision, life, comes out pre-tax too. This reduces your tax liability a little bit.

I see an advantage of staying in the lower tax brackets while you can with your student loan debt. There are income limits that will knock out that deduction. You may be happy with an extra $600-1k a month right now, but I'm sure you'll get bumped one day into the high tax brackets. Obviously it would make sense to pay off your student loans quickly before you make the big bucks and the IRS really takes a cut of it. How cool would it be to have a large income with no debt? The more you make the more they take, this is why we need the FairTax!

Sallie's Niece said...

Hey Jim you got me so confused! I currently have a pension (not a 401k). About 90 bucks is taken out of my paychecks twice a month because I am not vested yet.

The new job does not offer a pension. They probably offer a 401k, not sure. Are you saying I'm better off with my current salary then moving elsewhere?

Career wise I am seeking a change. I guess it's too early to speculate yet (still need to get an interview!) but before I fill out my next W-2 I may come looking for help!

Anonymous said...

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gypsytraveler said...

Try paycheckcity.com to get an accurate idea of your paycheck. It always works for me to the penny!