Poll of the Day > I got a pay raise for the first time ever.

(+) Yeah! (+)

An extra 66 cents an hour.

I now make double the minimum wage.

Sick! They're pretty cool. I gotta wait on union pay raises now since I topped out at my job. It felt good making those benchmarks.

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I would have loved that for my first raise. I got 25 cents. A nice solid 2% raise

Congrats

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Nice. Did you have to do anything to get it or was it just handed out?

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Zangulus posted...

And now youre in a higher tax bracket and make less money!

Thats not how tax brackets work. You dont get taxed higher on the whole amount, you get taxed the lowest rate up to the highest amount at that level then the remainder gets taxed at the higher rate, then repeat that again at an even higher rate if you go into another tax bracket.

Using phony bologna numbers because I dont feel like looking up real ones if theres a new tax bracket of 1% every $10,000 and you make $31,000 then you get taxed 1% on $10,000 ($0 - $10,000), 2% on $10,000 ($10,001 - $20,000), 3% on $10,000 ($20,001 - $30,000), and 4% on $1,000 ($30,001 - $40,000).
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Zangulus posted...

aDirtyShisno posted...

Zangulus posted...

And now youre in a higher tax bracket and make less money!

Thats not how tax brackets work. You dont get taxed higher on the whole amount, you get taxed the lowest rate up to the highest amount at that level then the remainder gets taxed at the higher rate, then repeat that again at an even higher rate if you go into another tax bracket.

Using phony bologna numbers because I dont feel like looking up real ones if theres a new tax bracket of 1% every $10,000 and you make $31,000 then you get taxed 1% on $10,000 ($0 - $10,000), 2% on $10,000 ($10,001 - $20,000), 3% on $10,000 ($20,001 - $30,000), and 4% on $1,000 ($30,001 - $40,000).

I know how tax brackets work. Yet Ive still seen, repeatedly, people getting small pay raises and then make less per hour after the taxes are removed.

I should also say that most people dont actually have their withholdings done properly and have more taken out than needed and get refunds. So in the long run they do still make more money.

Its part of the reason the IRS wants to change how withholding is done.

Thats because withholdings are a flat percentage based on what your expected tax bracket will be, so yes you may see a drop in pay on your individual paychecks but will see a higher amount on your tax return. You also decide your own withholdings so you could have less or no taxes withheld and just pay the taxes at the end of the year. In that case you would definitely see a higher amount on your paychecks.
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If people get more taken out when they make more, it's usually child support, back taxes, etc., something that could be avoided in a sense.
I think one of the few times you'll notice a big jump is once you make enough for taxes, $11,000 or whatever. Basically once you go from no taxes to taxed.

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Congrats.
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aDirtyShisno posted...

Thats because withholdings are a flat percentage based on what your expected tax bracket will be, so yes you may see a drop in pay on your individual paychecks but will see a higher amount on your tax return. You also decide your own withholdings so you could have less or no taxes withheld and just pay the taxes at the end of the year. In that case you would definitely see a higher amount on your paychecks.

I'm in the same boat as you (qualified accountant) but I also understand that for some people who live on a cashflow basis, it does make a material difference to them. I'm not sure how it is in the US but at least here in Australia, various other things such as social security benefits and certain tax deductions change based on income earned and it's possible to have bracket creep which can cause a sudden drop off in things which are not pro-rated.

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Congrats. But the problem with more pay is now you are higher on the list if your company ever decides they need to make some cuts.
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Just got a 25% raise at my job. It takes effect in a couple weeks, I believe...
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