It used to be a high bonus and lower base salary so that bonus would get taxed at a higher rate. Do we actually pocket more money due to a higher base salary? Wondering if anyone has done the math
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No. Your tax liability doesn't change based on when you get paid throughout the year. I don't understand how this confuses people. You get your bonus withheld at a high rate but you get the amount back that you are due considering your total taxable compensation at the end of the year
Because they tax your bonus at like 50% but salary at a lower rate. What am I missing
Your bonus isn’t taxed at 50%, it’s withheld at 50%. This is because when you get a $70,000 check, it’s treated as if you get paid $70,000 every pay cycle. When you file your taxes at the end of the year though you will get a lot of the taxes you paid back since you initially overpaid
Got it. So nothing changes except you have a little bit more cash flow earlier due to bigger base so you could slightly benefit from time value of money and dump that bitch into investments?
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