Overtime ($61/hr), super overtime ($69/hr) or no OT ($50/hr)

I created another thread titled "Which would you pick? $61/hr, $69/hr, or $50/hr" which will be deleted soon because I didn't include a poll.

Anyway:
$50/hr base pay

anything over 40hrs/week = $75/hr (time and half)
anything over 60hrs = $100/hr (double time)

sun= double time, no matter how many hrs worked (as liong as you've worked at least 8hrs/day mon-sat).

1) 56hrs/week
m-f 8hrs/day = 40hrs = $2000
sat 8hrs = 600
sun 8hrs = 800
$3400 = $61/hr

2) 80 hrs/week
m-sat 12hrs/day = 2000 + 1500 + 1200
sun 8hrs = 800
$5500 = $69/hr

3) 40hrs/week (8hrs m-f)
$2000 = $50/hr

Commute to/from work is 20min (each way).
you're single, no kids. You don't really need the $ but its nice. (and you have lots of free time on your hands.)
It's an ok job. you like it but you don't love it.

You can switch between the options on a weekly basis.
Option 3 is frowned upon by mgmt.
This is short term for ~3months, but can be longer if things go right. (Hopefully mgmt will start hiring people if things go right.)


It would seem 56hrs/week is the sweet spot?? (I chose this in the poll.)
most gain in $/hr over the base.

Which option would you pick? WHY?

I voted for option 3.

I value my free time too much to work any more than 40 hrs a week.

As I said in the other thread, these are before-tax numbers and are therefore meaningless. Taxes don't scale linearly.

Figure out what your tax burden will be (federal and state!) and then figure out what the difference is. You might be unpleasantly surprised as to how much extra money you actually get to keep in exchange for all that extra work.

Quote: AxiomOfChoice

As I said in the other thread, these are before-tax numbers and are therefore meaningless. Taxes don't scale linearly.

Figure out what your tax burden will be (federal and state!) and then figure out what the difference is. You might be unpleasantly surprised as to how much extra money you actually get to keep in exchange for all that extra work.

It only makes a difference annually IF and a big IF you move into a higher tax bracket. Someone at these wages is probably with basic deductions still in the 28% area. Therefore all of the extra money will be taxed at 28%, again on an annual return. People always complain about the extra money taken off weekly as a reason to not work OT when offered. Yes you may be taxed at a higher rate that week, but you will get it back when you file your return and the average will go back to 28%.

I find it amazing how many people find any excuse possible to not work OT when the extra money is there for the taking. But then that is a bigger sign of the times were are in where everyone is a victim and not responsible for what they have and dont have in life. Just my take!

this is dumb. You said that you can switch weekly so obviously you do as many hours as you can until you can't. Once you start feeling burnt out you switch to less hours.

/thread

80hrs a week is crazy. I've done it a couple of times for a week. I will no doubt have to do it again, but the week after is tough, and I need a break. On the flip side, I'm not in the position that I have to do that much work to keep body, soul and a family together.

It depends on the work mind. There's some work that's 'easier' than others.

Quote: Boz

It only makes a difference annually IF and a big IF you move into a higher tax bracket. Someone at these wages is probably with basic deductions still in the 28% area. Therefore all of the extra money will be taxed at 28%, again on an annual return. People always complain about the extra money taken off weekly as a reason to not work OT when offered. Yes you may be taxed at a higher rate that week, but you will get it back when you file your return and the average will go back to 28%.

I find it amazing how many people find any excuse possible to not work OT when the extra money is there for the taking. But then that is a bigger sign of the times were are in where everyone is a victim and not responsible for what they have and dont have in life. Just my take!

First of all, you are wrong. Even if it doesn't take you to a higher tax bracket, it's still true that the taxes don't scale linearly. Double the salary does not mean double the take-home, even if your marginal rate remains the same. This is because all your salary is not taxed at the marginal rate, so if you earn more, a higher percentage is being taxed at the higher marginal rate.

Second, he is talking about the difference between $100k per year and $250k per year. This will take him to a different marginal rate. At $250k a year you are squarely in the 33% rate, unless if you can somehow come up with $65k in deductions (not likely).

In fact, if he is in a state with a high state income tax, it may push him into paying AMT (in CA, this is around the level that it starts happening). The reason is that you don't take the standard deduction; you itemize (because state taxes are are deductible, so if your state tax bill exceeds the standard deduction amount, you itemize). You have to understand that when you are paying AMT in the "middle range", your marginal federal rate is essentially 35%. This is because the AMT rate is 28%, but also your AMT deduction is being phased out by 25c for every dollar you earn, which raises your marginal rate by 25% (ie, it moved it from 28% to 35%). So, he may very well be talking about the difference between a marginal rate of 25% (after deduction) to 35% (AMT + phase-out). And that doesn't even include the state taxes.

My point is that someone with a $250k income does NOT take home 2.5x the amount of someone with a $100k income. Trust me on this, I've been in (and passed through) both situations on my way up the ladder. Of course, it also depends which state you live in. You need to consider both how high the taxes in your state are (this will be the main factor in determining whether you end up paying AMT) and how "progressive" the tax structure is.

With $250k of income and no deductions to speak of, you are paying a lot in taxes. I am not saying that this will change the decision; all I'm saying is that when comparing two numbers, it makes no sense to compare before-tax numbers. You need to compare after-tax numbers.

Remember that he is not getting this money for free. He has to trade an extra 40 hours a week of his time for this. Time has significant value (after all, we can always make more money, but we all have only a limited amount of time on this earth, and I've never heard of anyone on their death bed saying that they wish they had spent more time in the office). When determining whether or not it's worthwhile to trade that precious time of his for extra money, he needs to look at the amount of money he actually gets to keep, not the pre-tax amount of money that he never gets to see.

Quote: AxiomOfChoice

First of all, you are wrong. Even if it doesn't take you to a higher tax bracket, it's still true that the taxes don't scale linearly. Double the salary does not mean double the take-home, even if your marginal rate remains the same. This is because all your salary is not taxed at the marginal rate, so if you earn more, a higher percentage is being taxed at the higher marginal rate.

Second, he is talking about the difference between $100k per year and $250k per year. This will take him to a different marginal rate. At $250k a year you are squarely in the 33% rate, unless if you can somehow come up with $65k in deductions (not likely).

In fact, if he is in a state with a high state income tax, it may push him into paying AMT (in CA, this is around the level that it starts happening). The reason is that you don't take the standard deduction; you itemize (because state taxes are are deductible, so if your state tax bill exceeds the standard deduction amount, you itemize). You have to understand that when you are paying AMT in the "middle range", your marginal federal rate is essentially 35%. This is because the AMT rate is 28%, but also your AMT deduction is being phased out by 25c for every dollar you earn, which raises your marginal rate by 25% (ie, it moved it from 28% to 35%). So, he may very well be talking about the difference between a marginal rate of 25% (after deduction) to 35% (AMT + phase-out). And that doesn't even include the state taxes.

My point is that someone with a $250k income does NOT take home 2.5x the amount of someone with a $100k income. Trust me on this, I've been in (and passed through) both situations on my way up the ladder. Of course, it also depends which state you live in. You need to consider both how high the taxes in your state are (this will be the main factor in determining whether you end up paying AMT) and how "progressive" the tax structure is.

With $250k of income and no deductions to speak of, you are paying a lot in taxes. I am not saying that this will change the decision; all I'm saying is that when comparing two numbers, it makes no sense to compare before-tax numbers. You need to compare after-tax numbers.

Remember that he is not getting this money for free. He has to trade an extra 40 hours a week of his time for this. Time has significant value (after all, we can always make more money, but we all have only a limited amount of time on this earth, and I've never heard of anyone on their death bed saying that they wish they had spent more time in the office). When determining whether or not it's worthwhile to trade that precious time of his for extra money, he needs to look at the amount of money he actually gets to keep, not the pre-tax amount of money that he never gets to see.

He is not working the full year though. This is short term temp work. It may be difficult to figure out tax consequences for this.

Quote: GWAE

He is not working the full year though. This is short term temp work. It may be difficult to figure out tax consequences for this.

Is it? It isn't mentioned in the original post.

In any case, you still need to take into account the tax implications and compare after-tax amounts. It's not really that difficult, especially since he can switch back and forth at will. For example, he may decide that 80hrs/week is worth it unless it would take him over some total annual income (which would effectively give him a pay cut), at which point it's no longer worthwhile. So he may work 80hrs/week for some number of weeks, and then revert to 40 hr/week, to keep his total annual income under the level where the taxes reduce his take-home to below the point where it's worthwhile for him to trade his time for the money.

If you could do this all year, his hourly rate (after tax) is actually about the same whether he takes the 40hr/week option or the 80hr/week option. In other words, his take-home from $250k is about 2x as much as his take-home for $100k (this is a rough ballpark estimate -- without knowing which state he lives in and whether he has any deductions it's impossible to be precise).

So, he would not actually be making any more per hour -- he would be working more hours for about the same hourly rate. This may still be worthwhile for him, but it's important to keep in mind when making the decision.

80 hours a week would suck. I'd never do that. 56 seems good.

If you work the 80/week for 3 months, and that's it for the year, that's ~70K salary. For the year, then, they will have withheld at a rate well above 28%, and if that's all your employment for the year, you're pretty solidly in that bracket and will have a good refund. So, yeah, depending on how old you are and how strenuous the work is, I could (and have) work 80/week for 3 months.

I'm not sure what hours-of-service legislation you're subject to, but nearly all jobs are not allowed to have you on the books without a day off, even with overtime, even temps, more than 13 days at the outside, and many jobs have shorter restrictions than that. (My particular career was restricted to 6 days before a forced RDO except during declared emergencies.) So It's hard to say how realistic your scenario is.

I hit the AMT at around 160K for several years as a single no kids and about 30K in allowed deductions in a no-state-tax-state. So the threshold's a lot lower than 250K. And if you're expecting to work more after this job this year, whether transitioning into FTE or finding a different job, that OT may well be almost a waste with the higher tax bracket taking the money off the top, and year-long employment adding to your total. The only thing that helps that improve short-term is that you top out FICA only a little past that point, and get a 7.65% raise for the rest of the year. But again, not long past that point you may bump into the AMT, though the changed the law on that pretty radically the last couple years, to the employees' benefit.

I retired, in part, because I was working for a net $1.24/hour, given all the things being deducted from my paycheck (nearly 60% of gross), and the pension I'd earned. It was easy to walk away at that point. So everybody has a point at which the time is worth more than the money. But short term, getting to put a chunk in the bank, yeah, I'd do the 80/week for 3 months.

Quote: AxiomOfChoice

As I said in the other thread, these are before-tax numbers and are therefore meaningless. Taxes don't scale linearly.

Figure out what your tax burden will be (federal and state!) and then figure out what the difference is. You might be unpleasantly surprised as to how much extra money you actually get to keep in exchange for all that extra work.

tax rate for single filers:
10% Up to $8,925
Tax rate: 15% $8,926 to $36,250
Tax rate: 25% $36,251 to $87,850
Tax rate: 28% $87,851 to $183,250
Tax rate: 33% $183,251 to $398,350

$50/hr = $100k/yr = 28% bracket.
$61/hr x 56hrs x 52 weeks = $177k/yr = same 28% bracket
$69/hr x 80hrs x 52 weeks = $287k = 33% bracket (very unlikely i'd work 80hrs/week for a full year)

seems no difference in tax rate between 40hrs/week and 56hrs/week?
thus $61/hr is the sweet spot, even short term?!

Remember that all your money is not taxed at the marginal rate, only the amount above the limit. So the $61/hr option does not earn you 61/50 x the $50/hr option; it earns you less (because everything between $104k and $177k is taxed at the 28% rate, but most of the first $104k was taxed at a lower rate)

Also, if you are using 52 weeks instead of 50 as your baseline, then the first one should be $104k/year.

And if you are in a state with income tax you need to consider that as well. Not to mention the possibility of AMT.

Quote: beachbumbabs

I hit the AMT at around 160K for several years as a single no kids and about 30K in allowed deductions in a no-state-tax-state. So the threshold's a lot lower than 250K.

There is no fixed threshold -- it's based on how many deductions you have. More deductions means you hit AMT sooner, of course.

$30k in deductions is a lot for a $160k salary (especially in a state with no income tax!) so you will hit AMT much earlier than I did. My only deduction worth mentioning is my state income tax, which is around 10% here in CA -- so with those numbers I tripped over AMT somewhere around $250k (I don't remember the exact number, but $250k is in the ballpark)

Also, was this a while ago? If so, note that they have raised the AMT exemption significantly (they seem to raise it every year). It's now around $52k. If we are talking pre-Clinton, they have also raised tax rates significantly since then, so it's now harder to hit AMT.

I'd alternate an 80 hour week and a 40 hour week. I need at least two days off every other week.

For 120 hours I make $2000 + $5500 = $7,500 or $62.50/hr.

Quote: AxiomOfChoice

There is no fixed threshold -- it's based on how many deductions you have. More deductions means you hit AMT sooner, of course.

$30k in deductions is a lot for a $160k salary (especially in a state with no income tax!) so you will hit AMT much earlier than I did. My only deduction worth mentioning is my state income tax, which is around 10% here in CA -- so with those numbers I tripped over AMT somewhere around $250k (I don't remember the exact number, but $250k is in the ballpark)

Also, was this a while ago? If so, note that they have raised the AMT exemption significantly (they seem to raise it every year). It's now around $52k. If we are talking pre-Clinton, they have also raised tax rates significantly since then, so it's now harder to hit AMT.

Yeah, the last time I paid the AMT was 2008; that's what I was saying about them improving it. Re: donations - That doesn't seem like a lot to me, but I operate differently than a lot of people.

Quote: beachbumbabs

Yeah, the last time I paid the AMT was 2008; that's what I was saying about them improving it. Re: donations - That doesn't seem like a lot to me, but I operate differently than a lot of people.

Oh, they were donations. I was wondering how you managed to find that much in deductions.

Quote: AxiomOfChoice

Oh, they were donations. I was wondering how you managed to find that much in deductions.

Yeah, about 1/2 donations, plus professional associations, and mortgage interest and property taxes. They add up.

Quote: beachbumbabs

Yeah, about 1/2 donations, plus professional associations, and mortgage interest and property taxes. They add up.

Mortgage interest deductions are allowed under AMT, so paying it doesn't help put you into AMT-zone.

The rest of it is not (I actually didn't even know that dues for professional associations were deductible at all. Then again I pay AMT so extra deductions don't help me... plus I'm not a professional anything)

Overtime at AT&T, time and a half for first 8 hours over 40, then double time. Work 8am -4am, crash on 2nd levels couch, do another
8am-4am. Then take a vacation day.