cash eqivelent question

[petitelover]

Greetings - Any Canadian accountants out there? If so, here is a question - If I spend $1,000 on a SP for a night of fun how much do I have to earn pre-income tax dollars in order to hand her those after tax dollars. I know there are a lot of variables but assume max tax bracket (what are they in Canada? In NYS - Fed +/- 38%, State +/- 7% plus Social Security) best and closest estimate. Thanks.

 

[Robio]

Depends on your rate of pay anything substantial 50% so $2000

 

[petitelover]

Depends on your rate of pay anything substantial 50% so $2000

Not knowing the tax tables in Canada, what annual income would be substantial?

 

[Moraff]

looking at my paycheques. ~$50K/year before taxes income gets about 30% taken off before it hits my wallet.

 

[y2kmark]

Not accounting, just math...

Most calculators have a reciprical (1/x) key. You were looking at $1000 and need to "gross it up" to pre tax. If the tax rate is 30% the reciprical is .77 (enter 1.3 and hit the reciprical key, if your calculator doesn't have that key or you have to do it long division by hand, it's 1/1.3) and $1000/.77 = $1298.70 - what you actually need to earn to have $1000 after taxes. For 40% it would be a reciprical of .71 and you would have to make $1408.45 pre tax to spend your grand. Sorry if reciprocal isn't spelled right (I'm not sure, and to lazy to go hunting a dictionary,) obviously, I'm more of a #s person.

 

[scrooge]

Most calculators have a reciprical (1/x) key. You were looking at $1000 and need to "gross it up" to pre tax. If the tax rate is 30% the reciprical is .77 (enter 1.3 and hit the reciprical key, if your calculator doesn't have that key or you have to do it long division by hand, it's 1/1.3) and $1000/.77 = $1298.70 - what you actually need to earn to have $1000 after taxes. For 40% it would be a reciprical of .71 and you would have to make $1408.45 pre tax to spend your grand. Sorry if reciprocal isn't spelled right (I'm not sure, and to lazy to go hunting a dictionary,) obviously, I'm more of a #s person.

You consider yourself a numbers person? You cannot be more wrong.

How is it in your example that, after 40% tax on 1408 (which is $560), you get $1000 after tax? 1408 less 560 is about 848. You would actually be under water if $848 was the right number.

The gross-up, if you call it that, is 1 / (1 - tax rate). So, if the tax rate is 40%, the gross up is 1 / 0.6, which is 1.66666. So to make $1,000 after tax assuming a tax rate of 40%, you need to make $1,666. 40% of $1,666 = 666, which yields $1,000 after-tax.

 

[great bear]

This is all to taxing for me.

 

[SucroseFree]

For 2006;

http://www.ey.com/GLOBAL/content.nsf/Canada/Tax_-_Calculators_-_2006_Personal_Tax

 

[petitelover]

sheesh, needless complications....

The top marginal rate (which kicks in just under $120,000) for an ontario resident is 46.41%. Thus, to have $1,000 after tax, you need to earn $1,866.

This simplified analysis assumes that you do not have any tax credits, or other obligations such as EI or CPP contributions.

Thanks Sukdeep - makes it simpler. Pretty similar in NYS when one takes into account Fed/State tax. Holy crap - $1,866 - Now I wish I didn't know!