So you’re moving up in the world and have been offered a job that pays a higher salary. But $40 An Hour Is How Much a Year?
If you’re curious about your gross yearly earnings and take-home pay after taxes, you’ve landed on the right page.
This article will equip you with all the essential calculations to convert your hourly wage to an annual salary. It will also assess how federal and state taxes will affect your earnings. I will also analyze your daily, weekly, and monthly earnings and take a look at the lifestyle this income level can provide.
So, let’s crunch some numbers!
- Yearly Income
- Monthly Income
- Weekly Income
- Daily Income
- After Tax Earnings
- Career Options
- More Info On Salary Conversions
- Final Thoughts
Let me make some assumptions for my calculations. I’ll consider a standard working day to be eight hours and a standard working week to be five days, a total of 40 hours, with 52 full weeks worked per year. To find the overall number of hours worked per year, we can work this out by multiplying the number of hours worked in a week by the number of weeks worked in a year.
- 40 hours x 52 weeks = 2,080 hours worked in a year.
From here, all we have to do is multiply our total yearly hours by our hourly rate of pay:
- 2,080 hours x $40 = $83,200 per year.
Assuming you work a 5-day week without taking any days off over the year, you can earn $83,200 a year on a $40 hourly salary. By American standards, that’s a pretty decent wage.
However, for most of us, taking at least two weeks off per year is necessary, and if you’re being paid by the hour, you won’t get paid for the time you take off. So let’s subtract 80 hours (equivalent to two weeks of work) from our yearly total of hours worked and recalculate for a more precise annual amount:
- 2,080 – 80 = 2,000 hours per year.
- 2,000 hours x $40 = $80,000 per year.
Even with two weeks of unpaid leave allowed for, you are still making $80k per year.
I will use a monthly measure based on the fact that most employees are paid every four weeks. As we have assumed a 40-hour working week, all we have to do is multiply this by the number of weeks worked in a month:
- 40 hours x 4 weeks = 160 hours per month.
Once again, we now have to multiply our total hours by our hourly rate:
- 160 hours x $40 = $6,400 per month.
As we have assumed a 40-hour work week, all we have to do is multiply this by our hourly rate:
- 40 hours x $40 = $1,600 per week.
Assuming you work an 8-hour day, multiply this by your hourly rate:
- 8 hours x $40 = $320 per day.
After Tax Earnings
It’s all well and good working out your gross annual income from a $40 per hour wage, but that doesn’t represent the amount you will take home after taxes have been deducted. Federal Income Tax, Medicare, Social Security, and extra state taxes are going to do some serious damage along the way.
Let’s now work out just how much that’s going to be on a $ 40-per-hour wage.
Federal Income Tax
To calculate how much Federal income tax you’ll pay on a $40 per hour wage, assuming you work all 52 weeks of the year, we have to check out the relevant Federal Income Tax brackets and do some simple calculations.
For the current tax year, the following table lists the tax brackets and the corresponding tax rates for each of those:
|Federal Income Tax Brackets||Tax Rate||Tax Owed|
|$0 to $11,000||10%||0 – 11,000 = 11,000
11,000 x 0.1
|$11,001 to $44,725||12%||44,725 – 11,001 = 33,724
33,724 x 0.12
|$44,726 to $95,375||22%||83,200 – 44,726 = 38,474
38,474 x 0.22
As we can see, three different tax brackets affect a person earning $40 per hour who works full-time every week of the year. To get an overall figure, all we have to do is add these three totals together:
- $1,100 + $4,046.88 + $8,424.28 = $13,611.16 owed in Federal Income Tax.
7.65% of your income will go towards social security and Medicare payments. Let’s do the math:
- $82,300 x 0.0765 = $6,295.95 owed in FICA taxes.
State Income Tax
Things get a little more complicated when trying to work out your level of state income tax. There are seven states nationwide that don’t charge any income tax whatsoever. These are Alaska, Washington, Florida, Nevada, Texas, Wyoming, and South Dakota.
Of the remaining states, some charge a fixed rate regardless of income level, and others have tax brackets with different rates on a sliding scale. Having looked at the various rates around the country, we are going to assume for our calculations that if you live somewhere that charges state income tax, you will pay, on average, around 5% of your income:
- $83,200 x 0.05 = $4,160 owed in state income tax.
Overall Tax Owed
|State Income Tax||$4,160|
|Federal Income Tax||$13,611.16|
So our total tax bill will be $24,067.11. Now, all we have to do to work out the amount you will take home is deduct this figure from the gross yearly income:
- $83,200 – $24,067.11 = $59,132.89 net income after tax.
It’s always good to know how much tax you are paying in percentage terms. We do this by taking our overall tax bill and dividing it by our gross income. You then multiply the result by 100:
- $24,067.11 / $83,200 x 100 = 28.927% paid in taxes.
Here is a table showing how this tax rate will affect the amount you earn per hour, per week, and per month:
|Period||Pretax rate||After-tax income at 33.707% (Inc. 6% state income tax)|
|Monthly rate (4 Weeks)||$6,400||$4,548.68|
How does $40 per hour match up to the national average?
If you are prepared to work a full 40 hours each week without a single day off all year, your gross income of $83,200 puts you at the 76th percentile of American earnings. Simply put, only 24% of American workers earn a higher wage than you.
The average American worker earns $54,132 gross income per year, which is $26 per hour. So in comparison, you are earning just under 54% more than the average hourly rate.
How well can you live on $40 per hour?
Well, that’s really down to where you live and how expensive your tastes are. Live in an expensive city like San Francisco or New York, and you’ll be spending way more on housing than you would if you lived in rural Nebraska.
Whilst you could undoubtedly afford to live in these places, there probably won’t be a lot left over at the end of each month. Choose your location wisely, and your level of disposable income could be substantially improved by lowering your base costs. That dream vacation or sexy sports car could become a reality if you don’t need to live in an expensive urban postcode.
To reach an income level of $40 per hour, you will have to be educationally qualified in your area of interest.
These careers all pay around that level:
- Real Estate Agent – $40.16 per hour.
- Midwife – $41.14 per hour.
- Speech Pathologist – $41.34 per hour.
- Veterinarian – $41.47 per hour.
- Massage Therapist – $42.45 per hour.
- Occupational Therapist – $43.87 per hour.
More Info On Salary Conversions
For more wage-related questions, you might also be interested in finding out How To Get A Pay Stub, the difference between Gross Pay vs Net Pay, and Salary vs Hourly Pay, along with How Do I Convert Salary To Hourly To Calculate A Part Time Rate?
If you’re still on the hunt for work, then check out the best Flexible Jobs That Let You Set Your Own Hours, the Top Easy Jobs That Pay Well, followed by the best 15 Part Time Jobs That Pay More Than 40 Per Hour, and the best 20 Part Time Jobs That Pay More Than 20 Per Hour in 2023.
If you are a hard worker and are willing to put in five days a week, every week of the year, you make a gross income of $82,300 per year. That’s substantially higher than the pay packet the average American receives.
Once a large chunk of your gross income has been paid to our governmental overseers to waste as they see fit, you will be left with $59,132.89 to live on for the year. That’s still a pretty decent income that will afford you a good quality of life as long as you aren’t living in one of America’s more expensive cities.
Good Luck and Happy Earnings!
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