PUBLIC SERVICE ANNOUNCEMENT. I’m gonna lose my shit if I hear one more person says that they would rather not take that raise, work that overtime or get that bonus because it will all just go to taxes anyway.
STOP! All of your income does not move to the next TAX rate when you earn an additional amount within a tax bracket.
Example: If your taxable income was $50,000 in 2020, you would calculate federal tax as follows:
- Pay 15% on the amount up to $48,535, or $7,280.25 Taxes Owed
- Pay 20.5% on the amount between $48,535 to $97,069, or $300.33 Taxes Owed
- Total federal tax payable: $7,580.58.
On $50,000 taxable income, the average federal tax rate is 15.16 percent—that’s your total income divided by the total tax you pay:
- Average tax rate = Total taxes paid / Total taxable income
Or simply put you do not pay the bracket tax on your entire income. Only the income that is earned within that specific bracket is taxed at that bracket’s rate. So go ahead work that over time, ask for that raise, get that bonus as earning more will not bump your entire income into the next TAX bracket.
https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit/taxes/taxes-2/5.html
Based on your own taxable income, what would your marginal federal tax rate be? Can you calculate your average federal tax rate?
Fresh out of university and my coworkers would say “don’t work OT it just goes to taxes!” … whether it’s taxed more, you still MAKE more money in the end. I ended up getting taxed more than my tax bracket that I hit that year. My tax refund was 8 grand LOL. Glad I didn’t listen to them.
This is a common problem for sure. I just say I’m taking one for the team and do all the OT.
Nice. Make some bank and help out the team. I’m sure you tried to explain it and just gave up.
Did you could pay your credit card with another credit card and pay the second one with another credit card? I bought 4 PlayStation and I could still buy another one. Loophole!!!
Nope. Don’t try this at home.
Amen. Sure they can increase taxes with brackets but those dollars they are collecting are better off being thrown in an incinerator than given to the govt
There is some truth to that. Budgets will balance themselves.
This blog sucks.
Thank you.