Part-time job or additional income: tax consequences

A frequently heard complaint from people with a second job, side job or additional income is that they have to pay so much tax on the extra earnings and that it barely pays off. But is this true? Do you really pay more tax on a second job? And what about the payroll tax credit? In short, is it worth having a second job or part-time job?

Contents

  • Pay more taxes
  • Payroll tax credit
  • Calculation examples
  • But what about the tax brackets?
  • More right to deductible items?

Pay more taxes

First of all, immediately remove the misunderstanding that you pay much more tax for the earnings from a second job. This is not true. The same amount of tax is withheld for a second job or part-time job as for your first job.

Payroll tax credit

The difference in net salary is because you usually cannot apply a payroll tax credit for a second job. The payroll tax credit is only applied once. It is applied to the job with the highest income. It is therefore possible that the payroll tax credit is applied to the second job.

Calculation examples

To emphasize that you actually do not pay more tax with a second job, the following are some calculations:

Situation: you earn 18,000 with one employer:

  • Salary: 18,000
  • Tax 33.1%: €5,958
  • Wage tax credit: 2,001 (reference date: 2013)

In this case you pay 5,958 – 2,001 = 3,957 in tax. This leaves you with a net amount of: €14,043.

Situation: you earn 9,000 each time with two employees:

Employer 1:

  • Salary: 9,000
  • Tax 33.1%: 2,979.00
  • Wage tax credit: 2,001 (reference date: 2013)

In this case you pay 2,978 – 2,001 = 978 in tax. This leaves you with a net amount of: €8,022. Employer 2:

  • Salary: 9,000
  • Tax 33.1%: 2,979.00
  • Wage tax credit: 0.00 (reference date: 2013)

In this case you pay EUR 2,979 in tax. This leaves you with a net amount of: 6,021. When you add the net amounts you arrive at 8,022 + 6,021 = 14,043. As you can see, the net amounts from the examples are exactly the same.

But what about the tax brackets?

In the Netherlands we have four tax brackets. The percentage of tax you have to pay varies from 33.1% (bracket 1) to 52% (bracket 4). There is a maximum amount per bracket, if you earn more you will end up in the next bracket. It can of course happen that you move up a bracket by taking a second job. Does this mean that, for example, you suddenly have to pay 52% wage tax (bracket 4) from 42% wage tax (bracket 3)? Yes that’s right. Fortunately, it is a progressive system. This means that you only have to pay 52% on the amount that exceeds the upper limit of bracket 3. The remaining wages still fall under the other brackets. So you will always have more net money left over when you earn more!

More right to deductible items?

What many people forget is that you are also entitled to higher deductibles. An example of this is the mortgage interest deduction. If you end up in a higher tax bracket, this also means that you can deduct your mortgage costs (partly or completely) at the higher rate. This makes the mortgage interest deduction higher. Suppose you pay 52% tax on 4,000 (bracket 4), then you may charge the same amount at 52% to determine the amount of the mortgage interest deduction. The remainder of the mortgage costs must still be charged at 42% for the mortgage interest deduction.

read more

  • Part-time job or additional income: is this allowed by your employer?
  • Part-time job or additional income: consequences for allowances
  • Part-time job or additional income: general tips
  • When will you get money back from the tax authorities?
  • Save on fixed costs & financial products