How to Calculate Your Take Home Pay
How much will your paycheck be after taxes and other deductions are taken out? What's the best way to determine how much your take home pay will be?
“Who is FICA and why am I paying him so much?” It’s a question that many of us have asked while examining a pay stub. FICA is an acronym that stands for Federal Insurance Contributions Act, the law that created Social Security. Your share of FICA includes employee contributions for Social Security and Medicare.
Employers also pays a share of the FICA tax for each employee.
FICA is just one of many potential paycheck reducers that represent the difference between your salary and the actual amount that you take home.
How to Calculate Your Take Home Pay
If you want to know what your paycheck will look like before you take a job, there is a way to figure out exactly how much you’ll have left over after FICA, federal taxes, state taxes, and any other applicable deductions are removed. Here’s how to calculate what your take-home pay will be.
What You’ll Need to Calculate Take Home Pay
There are a few things you should have on hand to calculate your take home pay:
- The amount of your gross salary. This means your earnings before taxes and deductions.
- Your number of personal exemptions. When you start a new job, you fill out a W-4 form to tell your employer how much to withhold from your check. The number may be zero or one if you are single, or greater if you have dependents.
- Your tax filing status. There are standard federal and state tax deductions that vary depending on whether you are single, married filing jointly, married filing separately, head of household, or a surviving spouse.
- Other payroll deductions. This category could include contributions to a 401(k) retirement plan, health insurance, life insurance, or a flexible spending account for medical expenses. It may also include union dues or any other garnishments that are taken from your wages. It helps to categorize these according to pre-tax and after-tax contributions, to deduct them from either your gross salary or after-tax calculation.
Steps to Calculate Your Take-Home Pay
A first step is to calculate your FICA for the year, otherwise known as your contribution to Social Security and Medicare. (Notice how it’s called a contribution rather than a tax? That’s because you’re supposed to get it back and then some after retirement.) Everyone makes a flat, 7.65% contribution to FICA on the first $118,500 of earned income. You can lop that percentage off before you start making adjustments to your gross income.
Next, adjust your gross income by subtracting personal exemptions and standard deductions that the Internal Revenue Service gives you before it calculates your income tax. The personal exemption rate changes each year, so be sure to find current exemption rates when making your calculation. For every exemption claimed on your W-4 form, you will subtract the current rate from your gross income. So if the rate is $4.050 and you take one exemption, subtract $4,050 from your income. If you take two exemptions, subtract $9,000.
Your standard deduction is subtracted next. Standard deductions also change from year to year, and are based on your filing status. You can find current standard deduction rates on the IRS website.
Once you’ve subtracted personal exemptions and a standard deduction, the resulting number should be very close to your taxable income. This is the total that will be used to determine your federal and state tax brackets.
How Much Will Taxes Reduce Take Home Pay?
There are several taxes that may be applied your gross salary, including federal income taxes, state and even local taxes. Here’s how to figure out what how taxes will impact your take-home pay.
The amount of federal tax you pay will depend on your filing status and bracket, which you can find in the Federal Tax Bracket tables updated annually by the Tax Foundation.
If you live in a state with a personal income tax, you will need to find your state tax bracket to determine how much will be deducted from your take-home pay. Each state has its own set of brackets, so it may there is not space to list them here.
The Tax Foundation also lists recent state individual income tax rates and brackets on its website. It also includes information on local taxes, where they apply. (New York City, for example, has its own tax on income.)
Once you have determined your federal, state and other income taxes, take the amount of tax owed and divide it by the number of pay periods in the year. If you are paid monthly, you would divide this number by 12. If you get paid every week, you would divide by 52. For those who are paid every other week, you divide by 26. The result will be your after-tax income.
Other After-Tax Payroll Deductions
Remember also to subtract any other deductions you are expecting to be made before you get your after-tax pay. Depending on whether they are pre-tax or after-tax deductions, you can deduct them from your salary before or after calculating income tax due. For example, if you contribute 6% of pretax salary to a 401k retirement plan 401k or retirement plan, take that amount from your gross salary before calculating your taxes.
Health insurance premiums that are paid by you are also typically taken from gross pay, before taxes are taken out. For union dues and other garnishments, you can verify whether they are taken out before or after tax, or use estimates for those figures.
Free Online Paycheck Calculators
Online resources can help you simplify the process. Once you have a sense of who exactly gets a piece of your paycheck and how much, you can easily determine your take-home pay using an online paycheck calculator.
More on Paychecks and Earnings
- Am I Earning Enough Money?
- Free Tools to Help Calculate How Your Salary Offer Compares
- How to Fill Out a W4 Form When You Start a New Job