4

I'm not exactly sure how to go about calculating this problem.

I'm a Canadian (Alberta) working in a ministry position at a church. My credentials qualify me for clergy housing, and I make just shy of $50,000 / year.

In my spare time I develop software, and I'm looking at a career change into that field. The jobs start at around $65,000 or $70,000 per year.

At first this looks like a sizable increase except for the fact that my current "TAXABLE" income is only $33,500 since the rest is tax free under clergy housing ($16,500).

A link to our tax brackets is located here.

also please note, both jobs have full health care and retirement plans, so that doesn't really factor into the equation.

So to recap.

I currently earn $50,000/year with only $33,500 of it being taxable
I'm considering a new job of between $65,000 and $70,000 / year with all of it being taxable

Is this a smart career move from a financial standpoint?
all other aspects will be decided upon outside the realm of this question

8

You'd be moving from 33.5K of taxable income + 16.5K of untaxable income, to 65K of taxable income (worst case). So the question is whether the net from the extra 31.5K of taxable income is more than the 16.5K, and since marginal tax rates in the relevant brackets are no more than 32% according to the table you posted (22% federal and 10% provincial), it's definitely a win to move jobs.

More precisely, the marginal tax rate is 25% on the first 8044 (41544-33500) and 32% on the rest, making for total extra tax of about 9.5K and thus net income (beyond the 33.5K baseline) of 22K. Compared to the 16.5K this leaves you 5.5K up. If you end up at the 70K end, you're another 3.4K up beyond that.

2

It looks like a coin toss.

What you have isn't bad at all. If you have enough free time with your $50k job to do extra stuff on the side, you can use that time to build a business. You're obviously a go-getter type, so this might suit you.

Which job is closer to your calling? All other things being equal, the more fulfilling job should win, no?

  • yeah, as I stated, I need to take all other aspects into account before making a final decision I'd never make a career move based on a SE question. However, looking purely at the financial aspects, I can't figure out the math. – Chase Florell May 5 '11 at 3:26
  • 1
    Part of it is opportunity cost. Will your new job leave you hurting for time to pursue other avenues of income? Those are as much of the financial part as figuring out what your take-home pay will be with each scenario. – mbhunter May 5 '11 at 3:36
  • sorry, I don't think I follow. If I take the new job, it will have much room for advancement, and low possibility of layoff. – Chase Florell May 5 '11 at 4:19
  • Right now you have two separate sources of income. That's better than one. Would you still be able to keep two income streams going if you took this new job? – mbhunter May 5 '11 at 4:51
  • 2
    Please also weigh the learning opportunity of the new job, where you get to increase your own value. It'd be great if you've had a career path in mind. – ASF May 5 '11 at 6:14

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.