Quote:
Originally Posted by Lubicon
Is there a quick way to determine how much of a wage increase would be necessary to financially offset the tax paid on a taxable benefit? Is it as simple as x=y ? ie increase salary by the amount of the taxable benefit? Or is there more to it? (ie tax paid on increased wage in addition to tax on taxable benefit). Am I overthinking this?
End goal is to keep take home pay the same after introduction of taxable benefit.
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Sure. Multiply the amount of the taxable benefit by your marginal tax rate, and divide by 1 minus your marginal tax rate.
EG. if you got $1000 worth of parking and your marginal tax rate is 40% the math is: $1000 * 0.4 / (1 - 0.4) = $666.67 salary increase required.
The tax on your new $1,666.67 of income is $666.67