How to Calculate Federal Taxes on Gross Pay

When you get a new job or a raise, or any other life change, you’ll want to figure out how much you will be paying in federal income taxes. You want to withhold the right amount of money, so you won't owe taxes when you file. There are some parts of your paycheck you likely won’t be paying taxes on, like health insurance and retirement savings. So how do you go about calculating federal taxes on gross pay?

Gross Pay, After-Tax Income Calculator

Maybe you want to make sure your employer is withholding enough taxes on your gross pay. So, it’s a good idea to calculate your federal income tax based on your current salary. One way you can do this is to to use this federal net income calculator to determine your withholding. You'll need your most recent pay stub, which has a lot of information on it.

Say your gross income is $1,200 per week. You want to know the tax on $1,200 per week. You also want to figure out what your paycheck will look like at $1,200 minus taxes.

When you look at your paystub, you realize that it’s not exactly taxes on $1,200. You may be setting aside some money in a qualified retirement plan, like a 401k. Then there’s the cost of your health insurance. So, if you are paying $50 a week in health, dental and vision insurance, and putting another $50 a week into your 401K, you aren't paying taxes on that money. If you have any other qualified deductions like dependent care, you should add those in. Also, there may be other taxable withholdings.

But for simplicity’s sake, your $1,200 a week drops to $1,100 for your total federal wages. You want to consult the Internal Revenue Service wage tables for 2018 to calculate the amount of tax to withhold, and here’s where things get a little complicated. Your weekly withholding allowance for 2018 on your $1,100 federal wages is $79.80. If you claim more than one withholding allowance, you multiply $79.80 by that number. If you claim two allowances, that totals $159.60. So back to our example, say you just claim one withholding. You would subtract $79.80 from $1,100, and that rounds out to $1,020. You then go to this year’s percentage tables for income tax withholding and find your weekly income under the Weekly Payroll Period. You will withhold $85.62, plus 22 percent of the money earned over $815. The total that you withhold each week from your paycheck for your federal taxes is $106. If you have more withholding allowances, your withholding total decreases. If you’re married, your total withholding also decreases.

Exceptions On Withholding

The term federal taxable income is your total income minus your personal exemptions and standard or itemized deductions. So the amount of taxes you pay will probably be different from the above amount. But this lets you know how much you should withhold so you shouldn’t need to owe any additional tax, based on earnings from your paycheck. If you have additional income sources, you’ll need to figure that tax separately.

Changes For 2018 Taxes

The new tax tables represent the increase in the standard deduction, the repeal of personal exemptions and changes in tax rates and brackets for the 2018 taxes, to be filed in 2019. So if you haven’t checked your withholding rate recently, now is a good time to do it. Most employers made changes based on the new tax tables, but it’s always good to check. Your withholding information is done using IRS Form W-4. The IRS especially encourages you to check your withholding status if you are a two-income household. The child tax credit is now $2,000 for each qualifying child, up to age 16. There is now a $500 credit for dependents who are 17 and over who don’t qualify for the child tax credit. Many parents forget to change their withholding when their children reach 17.

For the latest information on IRS income tax withholding, go here.

Withholding For 2017

If you’ve yet to file your 2017 taxes, your withholding probably met the guidelines of the old tax laws, so if you listed the right number of exemptions, you should be in good shape. If not, you will want to adjust your exemptions so they're in line with the new tax laws.

Tips

  • To determine how many allowances you claimed on Form W-4, ask someone from your employer’s human-resources department.
  • If you are a salaried employee, you do not need to calculate your regular or overtime earnings.
  • When determining your net pay, or take-home pay, you must also determine your FICA taxes. Refer to IRS Publication 15 to determine the current FICA tax rate, which is 7.65 percent as of the 2012 tax year. Multiply your gross pay by the current FICA rate. For example, if your gross pay is $1,425, your FICA tax is $109.01 (1,425 X .0765). Subtract this number, your pretax withholdings, and federal income tax to determine your net pay.

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About the Author

Karen Gardner is a former feature editor and writer and is now a freelance writer. She looks forward to doing her family's taxes each year, and likes to write about business for the rest of us.