Auto Loan. Contact Us. Client Portal. Schedule A Call. July 21, Tax Planning. First Name. Last Name. Take as an example a single working mother who is a nurse working at the community hospital. Now assume that her boss asks her on Friday if she wants to come in on Saturday, work eight hours of overtime, and earn time and a half. Sounds at first like a great deal.
Her net pay, after taxes, will be much lower. On her overtime earnings, she will have to pay a 28 percent federal income tax, a 7. In addition, her employer must pay a 7. Or to put it another way, of the eight hours she works on Saturday, three and a half go to paying taxes.
For use case. Our customers. For small business. For enterprise. An overtime tax calculator can help you work this out quickly and easily, but you can also work out your own tax with a fairly straightforward calculation.
So, does overtime get taxed? The simple answer is yes — overtime does get taxed. In fact, overtime is taxed as the same rate as ordinary pay. Using an internet overtime tax calculator can make calculating tax easy, but you can also work out the number for yourself. Remember that there are different tax bands based on your total income, so you may find that your overtime pushes you into the next band. The confusion lies in the difference between your average tax rate and your marginal tax rate.
Your average tax rate is simply the amount of tax paid, divided by your income. Since Canada has a progressive tax system, your average tax rate will always be lower than your marginal tax rate.
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