Analyze Your Tax Liability
How your salary affects your tax liabilityThe amount of taxes you owe on your income. It can also include taxes on self-employment or tax penalties for early withdrawal of IRA monies and lack of health care coverage. is often overlooked when determining salary requirements. Overall, the amount of federal and state taxes you pay through your paycheck depends on several conditions:
Current income tax rates
Your gross incomeGross pay is the total amount you are paid before taxes and benefits are taken out. Your net (take-home) pay is the amount you will take home after deductions for payroll taxes and other items such as health insurance..
Your filing status (single, married filing jointly or separately, head of household)
The number of dependents and allowances you claim on your W-4 form
Work benefit programs that lower or defer taxes
Your employer pays a portion of many of your payroll taxes on your behalf. (If you are self-employed, you pay both the employer and employee sides of the tax.) Your pay stub will show all the deductions your employer takes out of your paycheck, including:
Before you accept a new position, pay attention to what will happen with the income you earn.
If you will earn more than you do currently, what impact will the extra earnings have on your tax liability?
How will your new income or taxes impact your discretionary incomeIncome leftover after taxes or other deductions.?
Would your new salary exceed what you could expect from a current employer if you were to receive a raise or bonus in the coming year?
Is there anything less tangible you are giving up for a bigger salary?