With the United States caught up in an unprecedented rash of inflation in the early part of 2022, many Americans are scrambling to figure out if their current income will be enough to match the cost of living moving forward. With this in mind, how much will a person making $25 per hour earn in a year?
Twenty-five dollars an hour adds up to about $52,000 in gross income on a yearly basis. While everyone’s tax status is different, this same hourly wage will likely come in between $35,000 and $40,000 annually, after taxes.
It is important to note that these figures represent an estimate of what someone making $25 per hour could expect to make in a year. There are several factors that could make the final figure differ from person to person. We will explore all of these in greater detail in the following article, so read on to find out everything you need to know about what a person making $25 per hour can expect their yearly income to be like!
How Much Does $25 an Hour Add Up to in a Year?
Twenty-five dollars an hour adds up to roughly $52,000 a year in gross salary.
Let’s take a look at the math.
In 2021, there were 261 days in the federal working calendar.
If it is assumed that you worked a standard 8-hour day, and you worked every day on the work calendar, you would have earned $52,200 in gross income in 2021 (8 x 261 x $25).
However, the actual amount of money you bring home will be quite a bit less after taxes are withheld from your paycheck. The following are some of the taxes that your employer may keep:
- Federal income taxes (usually the biggest chunk withheld)
- State taxes
- Local taxes
- FICA and state insurance taxes (this may cover items such as social security, medicare, unemployment, disability, etc.)
This will differ from job to job. Few employers withhold local taxes, and some jobs don’t pay into all of the FICA programs. In addition, if you are filing jointly with a spouse who makes a lot of money, your federal and state withholding may be a lot higher than for a person filing individually.
However, the general amount estimated for tax withholding is around 25% of gross pay.
Therefore, if your gross annual income at $25 an hour is $52,200, then your after-tax income can be estimated at about $39,150 [$52,200 x (1 – .25)].
The other thing to take into consideration is that many jobs have other types of pre-tax withholding. Some of the most common include:
- Personal insurance (health, vision, dental, life)
- 401K or other retirement contributions
- Health savings account (HSA)
Again, while withholding can vary widely from employee to employee, it is a good rule of thumb to estimate that any pre-tax withholding, combined with tax withholding, will represent roughly one third of your gross paycheck.
As a result, after everything is taken out of their paycheck, a person making $25 an hour can expect to make roughly $34,974 [$52,200 x (1 – .33)] in a year.
A final factor to consider is that not everyone will work 261 days in a year. That is just the number for federal employees in 2021. There are several federal holidays that few private employers observe.
In addition, those working in grocery or emergency response jobs–among many others–may even be required to work on the major holidays.
Finally, not all jobs offer paid time off or vacation, so if you are an hourly employee who misses work for these reasons, you will receive a noticeably lower annual income.
What Is My Monthly Salary at $25 an Hour?
It may seem intuitive to take your yearly income and divide by 12 to arrive at how much you will make each month at $25 an hour.
This is fine for estimations but is not completely accurate since some months will have more scheduled work days than others.
For example, as the shortest month, February will likely have fewer work days than the other months. Depending on how the holidays fall, November and December may have fewer, as well.
If we look at the data from 2021, February had the fewest work days with 20, and March and December had the most work days at 23, with the other months falling in between. Monthly pay at $25 an hour can be estimated with the following table:
|Monthly Income||20 Days Worked||21 Days Worked||22 Days Worked||23 Days Worked|
|Estimate After Tax Withholding||$3,000||$3,150||$3,300||$3,450|
|Estimate After All Withholding||$2,680||$2,814||$2,948||$3,082|
Is $25 an Hour Enough to Live On?
There is no straightforward answer to this question.
In completely practical terms, yes, $25 an hour is enough to live on. If you are willing and/or able to live in modest housing or live with roommates, buy store brand food and cook at home for every meal, take public transportation, and shop for clothing at thrift stores, $25 an hour is plenty to live on.
However, this is not the reality for many people.
Part of the American dream is buying your own home. Given the current explosion in housing prices and soaring interest rates in most parts of the country, $25 an hour wouldn’t come close to making that dream a reality without a significant other making at least that much on top of what you make.
In addition, families, people with medical bills, and those with student and other kinds of debt will likely find it hard to live on $25 an hour. It also doesn’t give you much wiggle room for leisure or entertainment expenses.
Everything You Need to Know About $25 an Hour
Twenty-five dollars an hour equates to a gross yearly income of about $52,000, an after-tax income of $39,000, and an after-all-deductions income of about $35,000. While these figures may vary significantly given each employee’s personal circumstances, they can make a great starting point for people outlining a yearly budget at $25/hour income.