Pay stubs often look like itemized receipts. First, there's the amount of money you earned during that pay period, followed by one or more deductions. The final total shows what you ultimately deposit in your bank account. The difference between your initial income and final deposit may leave you wondering exactly what percentage is withheld for tax purposes.
The answer depends on two main factors: How much money you make and your marital status. Your employer uses form W-4 to determine how much income tax to withhold, and this form does give you some control over how much or how little is withheld. If too much money was withheld, you'll receive an income tax refund after filing your taxes the following spring.
Income tax percentages for single filers are delineated accordingly: 10 percent withheld for incomes between $0 and $9,525; 12 percent withheld for incomes between $9,526 and $38,700; 22 percent withheld for incomes between $38,701 and $82,500; 24 percent withheld for incomes between $82,501 and $157,500; 32 percent withheld for incomes between $157,501 and $200,000; 35 percent withheld for incomes between $200,001 and $500,000; and 37 percent withheld for incomes greater than or equal to $500,001.
The income for each tax bracket is more or less doubled when a married couple files jointly: 10 percent withheld for incomes between $0 and $19,050; 12 percent withheld for incomes between $19,051 and $77,400; 22 percent withheld for incomes between $77,401 and $165,000; 24 percent withheld for incomes between $165,001 and $315,000; 32 percent for incomes between $315,001 and $400,000; 35 percent for incomes between $400,001 and $600,000; and 37 percent withheld for incomes greater than or equal to $600,001.
Standard deductions represent an amount that is subtracted from your income before a tax rate is applied. Before looking at the above tax brackets, subtract either $12,000 (for single filers) or $24,000 (for married filers) from your income. Use this amount to determine your tax bracket.
If you're self-employed, keep in mind a special tax called the self-employment tax. All businesses pay tax into Social Security and Medicare benefits. When you run your own business, even if you're the only employee or do not have an incorporated business, you must pay these taxes as well. This is taken care of through the self-employment tax, which is filed through Form 1040, Schedule SE. The self-employment tax adds 15.3 percent to your tax bracket.
Because so many factors influence the final amount of tax owed (including whether you have any children or other family members dependent on your income, whether you pay into an IRA fund, whether you get income from other sources, etc.) use tax brackets as guidelines or speak to your company's human resource department for more specific information.
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- Tax Rate vs. Marginal Tax Rate
- How to Determine Take Home-Pay from Gross Income
- Federal Income Tax Payroll Deductions
- Can an HSA Reduce Gross Taxable Income on Your Payroll Statement?
- Your Money and Taxes
- Does the OASDI Tax Vary?
- A List of the Federal Taxes Withheld From Most Employee Paychecks