# Take home pay help



## jxm1092 (Jun 17, 2013)

Hello everyone. So just for a little background I am a US resident living in western NY (Buffalo, Rochester, Syracuse area) and I am being offered a position in Montreal with an amazing company. My dream job if you will. I have a wife who is a stay at home mother to a 1 1/2 yr old and a 3 month old. 

All of the following numbers I put in CAD currency since that what matters in Montreal given today's current rate of 1USD=1.02CAD. Right now I make just above $64k before taxes and $44.7k take home after taxes, med ins, etc. The position I'm being offered is $70k gross with a yearly percentage based bonus of 15%. I've tried to do research on cost of living differences and it seems to be about 14% higher in Montreal compared to where I am now. I intend to counter offer but I'm trying to maximize my pay without spilling over into the next tax bracket which would most likely costs me money. I am trying to determine my take home pay and figure out what the taxes would be, roughly, on the bonus.

Ok so let's see if I did this math right. Given my engineering background I sure hope I can do the simple math lol. I used this website for the federal reference and then applied the math the same way with this website for provincial taxes. I'm choosing not to factor in the bonus since it does have the ability to fluctuate from year to year.

So federal:


70000
-43561
26439
*0.22
5816.58
+6534

12,350.58 for federal taxes

Then Quebec taxes:

70000
-41095
28905
*0.2
5781
+6575 => this came from the 41095*.16 similar to first federal tax level

12,356.2 for Quebec taxes

12,356 + 12,350 = 24,706 in taxes making my take home 45,293.

So if this math is right then to me that means it's a 5.5% pay increase, however, the cost of living increase (based on my internet research) is somewhere in the ball park of 15%. This tells me just to cover that 15% increase I need a minimum base salary of 77k when I plugged it all into excel. So is my math right?


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## MoneyGal (Apr 24, 2009)

Your math may be right but you need to factor in the various credits and deductions for which you'd be eligible. You'd be further ahead to dummy up a Canadian tax return. I'm not on a home computer so I can't do this for you, but either someone here can do it, or I will do it tonight - give you a clearer idea of your true after-tax estimated income. It is unlikely to be what you've posted, as at a minimum you will be entitled to dependent credits for your spouse and kids.


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## MoneyGal (Apr 24, 2009)

Also - this calculator gives $48,762 (with no family deductions) http://www.ees-financial.com/calculators/TakeHomePayCalculator.htm

Here is a good, detailed calculator which will give you a much closer idea of your likely outcome: http://www.taxtips.ca/calculators/qctaxcalc.htm


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## jxm1092 (Jun 17, 2013)

Do those credits get applied at the time of payroll though? I guess I'm more concerned with what the bi-weekly take home would be as opposed to my actual net pay after filing taxes and such.


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## atrp2biz (Sep 22, 2010)

jxm1092 said:


> I intend to counter offer but I'm trying to maximize my pay without spilling over into the next tax bracket which would most likely costs me money.


Remember that income taxes brackets are based on marginal income. If you spill over into a higher bracket by $1, it is the $1 that is taxed at the higher rate--not the income in the lower brackets.


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## MorningCoffee (May 8, 2013)

jxm1092 said:


> but I'm trying to maximize my pay without spilling over into the next tax bracket which would most likely costs me money.


I won't comment on the Math since all I do is plug my numbers into software, but your above statement struck me. Making more money doesn't cost you. You would only pay the higher taxes on the amount you earn above a bracket. 

Federal tax rates for 2013

15% on the first $43,561 of taxable income, +
22% on the next $43,562 of taxable income (on the portion of taxable income over $43,561 up to $87,123), +
26% on the next $47,931 of taxable income (on the portion of taxable income over $87,123 up to $135,054), +
29% of taxable income over $135,054.
http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

So for example, if you made 90k, you would only pay the higher federal tax of 26% on $2877 (the difference between $90,000 and $87,123)

And that's not considering deductions.

edited to add: looks like atrp2biz beat me to it!


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## jamesbe (May 8, 2010)

IMO cost of living in Montreal will be higher after all is said and done. Fuel costs alone are probably 50% higher. Do you have family in upstate NY? Will you be driving back and forth to visit? Costs go up there as well.

This to me sounds like a case where you should look at the numbers but look at your heart as well. You say this is your dream job, that's a huge factor. What about mobility upwards in future years, perhaps a small cut now will be made up for later. Do you want to live in Montreal? Are you prepared for the culture shock of the french? I think there are more factors here, many more than the money factor, in fact it seems to me in this case money would be the smallest issue.


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## jxm1092 (Jun 17, 2013)

I see the point several of you are making on the higher pay portion. You think I would have caught that since I did the math that way, so thank you for pointing out my oversight. 

As for everything else, we have weighed all the external factors and money is the crux at this point. What good is a culturally rich location when you don't have the ability to enjoy it because you are hampered by lack of funds to do certain things. There is a career path involved with this position although it could be a ways out to promotion, but it exists which is good I think. So really my main concern is whether or not this offer is:

1. a raise seeing as how it is a management position with more responsibility and actually managing people and large projects compared to what i'm doing now
2. accounts for the estimated 15% increase in cost of living associated with Montreal while still maintaining number 1.


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## Eclectic12 (Oct 20, 2010)

jamesbe said:


> IMO cost of living in Montreal will be higher after all is said and done ...


It will depend a lot on how everything stacks up, where the OP will have to identify the differences that apply to him. 

My sister would like the cheap daycare (I believe it's still $7 per day) and the cheaper university tuition costs while my co-worker likes the case of 24 Corona or other special of the week for $24.99 (Ontario is $44.95, currently on sale for $40.95).

The last article I saw comparing Ontario versus Quebec figured it varied (i.e. family using lots of service is cheaper in Quebec, single person is cheaper in Ontario).




jamesbe said:


> ... Fuel costs alone are probably 50% higher. Do you have family in upstate NY? Will you be driving back and forth to visit? Costs go up there as well...


Additional distance will add to the overall cost, as will driving around Quebec in general.

I'm not sure the downtown Montreal fuel prices will add that much. The Ontario border is around 50 minutes from downtown. If cheaper still gas is the objective, Champlain NY is also 50 minutes (assuming good traffic).





jamesbe said:


> This to me sounds like a case where you should look at the numbers but look at your heart as well. You say this is your dream job, that's a huge factor. What about mobility upwards in future years, perhaps a small cut now will be made up for later.
> 
> Do you want to live in Montreal?
> 
> Are you prepared for the culture shock of the french? I think there are more factors here, many more than the money factor, in fact it seems to me in this case money would be the smallest issue.


All good things to consider but bear in mind, people have lived just fine in Montreal with little or no French for decades. Though is one does learn French, it is also a good thing for the resume .... :biggrin:


Cheers


*P.S.* 

It's good to check the tax numbers, housing costs but it is important to look a more than that, as jamesbe says. 

Otherwise you might end up like a couple of my relatives who were only looking at the tax rate & house costs between Toronto, ON and Chicago, Ill. The idea that there were more factors to look at was dismissed at the time as these two were seen as so much better in Chicago. The other factors meant that they ended up moving back to Canada in less than two years.


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## Rusty O'Toole (Feb 1, 2012)

What are you paying for health insurance?


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## jxm1092 (Jun 17, 2013)

Rusty O'Toole said:


> What are you paying for health insurance?


I pay 240 every two weeks for insurance for my whole family. Kids are free if they go to the doctor until they are 19. If my wife or I go we pay $40 for normal doctor or $60 if we go see a specialist. We are both healthy though and rarely see a doctor so to me the free health care is not yet an advantage although I do realize that can change at any point in time.


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## jxm1092 (Jun 17, 2013)

Is anyone familiar with the health system for a foreigner like me when first arriving to the country? Also can anyone tell me what the taxes are like on a bonus? I assume it's higher, but my direct supervisor there said his is taxed at 60%. Just would like to know so I can factor the proper number into my yearly pay.


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## MoneyGal (Apr 24, 2009)

You will be eligible for public health insurance but 1. you must apply and 2. there will likely be a waiting period (I don't know the rules for Quebec, in Ontario the waiting period is 3 months). You should find out how long the waiting period is and you should purchase private insurance to cover that period. 

As for how bonuses are taxed, they are taxed as ordinary income just like your paycheque. HOWEVER, when you receive the bonus, it is usually/often subject to a high rate of withholding tax. This high rate will be adjusted, if necessary, when you file your yearly income tax return. Also, you can avoid having tax withheld on the bonus if you place it directly into an RRSP (which would be new for you, if you decide to open a tax-deferred savings account in Canada).


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## Eclectic12 (Oct 20, 2010)

MoneyGal said:


> ... As for how bonuses are taxed, they are taxed as ordinary income just like your paycheque. HOWEVER, when you receive the bonus, it is usually/often subject to a high rate of withholding tax.


It's been a long time since I've had a sizable bonus but I regularly have a fair amount of overtime. 

As mentioned, the withholding rate is higher on my overtime than regular income. If I do nothing about it where employment income is the main source of the total taxable income, I'm usually getting a refund when that year's income tax return is file and processed.




MoneyGal said:


> ... This high rate will be adjusted, if necessary, when you file your yearly income tax return.
> 
> Also, you can avoid having tax withheld on the bonus if you place it directly into an RRSP (which would be new for you, if you decide to open a tax-deferred savings account in Canada).


Hmmmm ... this may vary from employer to employer. ... Or it might be specific to a bonus.

The only adjustments to withholding taxes I can recall my employer making in Ontario is either:

1) to bump them up (usually due to a significant salary increase).

or 

2) decrease it, in response to me filing a T1213 "Request to Reduce Tax Deducted at Source for Year(s)" form. 
Note that when filing the T1213 - one has to make sure they follow through during the year on whatever was reported on the form to avoid a tax bill. For example, if one says one is going to give $10K to charity and at the end of the tax year one gave $5K - then likely not enough tax has been collected.

I don't recall reductions of the withholding tax despite having a five figure refund on several occasions.

http://www.prioritytax.ca/blog/tag/t1213/
http://www.cra-arc.gc.ca/E/pbg/tf/t1213/


*jxm1092:* My understanding is that an RRSP is similar to a 401K in the US, just to give you a rough idea.

From the blog of a CMF member:
http://www.moneysmartsblog.com/canadian-rrsp-vs-us-401k-comparison/


Cheers


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## Kail (Feb 7, 2012)

I get quarterly bonuses that range from $2,000 to $4,000 and I'm almost always taxed just over 30%. However, I'm not a good example since every year I owe the gov't a few hundred on my taxes even with my RSP deductions.


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## MoneyGal (Apr 24, 2009)

(this may be a legacy of working in financial services - bonuses can be paid as pre-tax income [i.e., the entire amount of the bonus] into my RRSP)


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## Eclectic12 (Oct 20, 2010)

MoneyGal said:


> (this may be a legacy of working in financial services - bonuses can be paid as pre-tax income [i.e., the entire amount of the bonus] into my RRSP)


That's where the options the employer offers will drastically affect what the possibilities are. 

In my case - the bonus could be paid, after-tax into my RRSP and the T1213 meant I didn't have to wait months to get the refund.


For overtime - the typical option has been to have it paid into the company group RRSP pre-tax. The only way to get overtime into my RRSP is the same after-tax contributions (with a T1213 if I want the refund earlier).

My latest employer has added an extra option for overtime to be paid, pre-tax into the supplemental pension. This can purchase a range of benefits including extra indexing or bridge financing to top up the reduced pension from an early retirement.


* jxm1092:*
If you can get high level details of the various options from the potential employer in advance, that helps. If not, take the time to review them in detail before the bonus is paid.


Cheers


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