What Are the Standard Payroll Deductions?

Nothing is certain but death, taxes -- and standard tax deductions that lighten your pay. Standard deductions can be either mandatory or voluntary. Your employer makes the standard deductions following the orders of the federal, state or local government. If it's a voluntary deduction, you have to accept it in writing.

Federal Income Tax

This mandatory tax, which covers federal programs such as law enforcement and defense, is based on your W-4 form. Your employer calculates it based on your filing status and the number of allowances on the W-4. Then, it makes deductions based on the Internal Revenue Service Circular E tax table that goes with the W-4 and your wages and pay period.

FICA Taxes

The Federal Insurance Contributions Act imposes Social Security and Medicare taxes. The former pays benefits to retirees or the disabled and their dependents. The latter covers hospital insurance to qualified persons when they reach 65. Social Security tax, as of 2012, was 4.2 percent of taxable wages up to $110,100 for the year. Medicare was deducted at 1.45 percent of all taxable wages.

State and Local Taxes

State income tax pays for state programs such as public health and correctional and rehabilitation facilities. You must pay this tax if you work in a state other than Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming. In addition, you may have standard deductions from local governments. That could show up as a state, city or even county tax.

State Unemployment Tax

Three states, Pennsylvania, Alaska or New Jersey, have mandatory unemployment taxes to help cover the needs of unemployed workers. In all other states, this is an employer-paid tax. The withholding rate depends on your state. For example, in 2012, Pennsylvania's unemployment tax rate was 0.8. In Alaska, it was .66 percent of taxable wages up to $35,800.

State Disability Insurance

Employers in California, Rhode Island, Hawaii, New Jersey and New York are legally required to carry disability insurance. In some cases, the employer alone pays the insurance. In other cases, it shares the burden with the employee. For example, at the time of publication, employees in California pay state disability insurance at 1 percent of taxable wages up to $95,585.

Voluntary Deductions

These deductions are the ones you must approve. They may include pretax or after-tax health and life insurance, a 401(k) plan or a flexible spending account. In most cases, you can add or stop these deductions on your own schedule.


About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.