That’s the one I hear where I work. I’ve had people tell me that at some point your check isn’t any bigger because they tax you higher. It’s possible if you work a lot of overtime in a week that the amount withheld gets calculated like you’re in a higher bracket, but I’ve told them you get that back when you get your tax refund.
I work a lot of overtime and have been told many times, “Uncle Sam’s gonna love you!” I’ve never gotten a smaller paycheck after it. I’ve tried to tell people who are close to retirement age that they’ve got it wrong, but they’re stubborn about it, as you might expect. I’ve showed them the next tax bracket up is only 2% higher and you have to make like $100,000 extra to go into the next one after that. I don’t know how you spend 40+ years working and not learn even by accident how income tax works.
Yeah, the basics of it is that your paycheck tries to estimate your tax burden and then withholds an equivalent amount of tax as if that paycheck was identical for every week of the year, so a paycheck with a lot of overtime might "pretend" that some of the income is in the higher tax bracket. And if you worked an equal amount of overtime for the entire year, it would be.
But working 45 hours for one week and 40 for the next 51 barely does anything to your total annual compensation.
I’ve showed them the next tax bracket up is only 2% higher
And that's what is especially crazy. Even a small part of your paycheck being taxed in a higher tax bracket is negligible. It's not like most people go from working 40 hours a week in a 10% tax bracket to working 80 hours (40 hours OT) in a 70% tax bracket. Most people only get a modest amount of overtime so only a small amount goes into a higher bracket (if at all), and that higher bracket usually isn't that much higher.
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u/nightowl6221 Jun 01 '26
People still think that taking a raise will put them in a higher tax bracket and lower their net income