Salary vs. Hourly Pay: How Take-Home Pay Compares
How to convert an hourly wage to an annual figure for tax purposes, and a worked example comparing hourly and salaried take-home pay.
Salaried and hourly pay are taxed by exactly the same rules once converted to an annual figure — the difference is entirely in how that annual figure is calculated, and how predictable it is week to week.
Converting hourly pay to an annual figure
Annual gross = hourly rate × hours per week × 52. A $25/hour job at 35 hours/week comes to 25 × 35 × 52 = $45,500/year — but this assumes consistent hours every week, which is often the biggest source of uncertainty for hourly workers compared to salaried employees.
Worked example
That same $45,500/year single filer in Texas (no state income tax), paid weekly, with no pre-tax deductions: taxable federal income of $30,500 gives $3,421.50 in federal tax, plus $3,480.75 in FICA, for a net annual pay of $38,597.75 — about $742.26 take-home per week out of $875.00 gross.
What salaried pay smooths out that hourly doesn't
- Consistent gross pay — a salary doesn't fluctuate with hours worked, while hourly pay drops if hours are cut and rises with overtime.
- Overtime eligibility — many hourly workers earn 1.5× pay past 40 hours/week, which salaried "exempt" employees typically don't receive regardless of hours worked.
- Predictability for budgeting — because net pay is steadier, salaried take-home pay is easier to plan a monthly budget around than variable hourly income.
Use either mode in the Paycheck Calculator to see your own estimated take-home pay, whether you're paid a salary or by the hour.