How to Calculate Florida Payroll Taxes

How to Calculate Florida Payroll Taxes
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Florida is a unique state because it doesn't have a state income tax. Owing to this, many people, including retirees and those who dislike paying taxes, move to the state. Moreover, none of the Florida cities charges a local income tax. The median household income in Florida determined from data from 2014 through 2018 was ​$53,267​ according to the U.S. Census Bureau.

Summary of Payroll Taxes

There are two categories of payroll taxes based on who contributes – payroll taxes that come out of your pocket and those that you must collect and remit if you're an employer.

Payroll taxes that come out of your pocket are further categorized into FICA and FUTA tax.

FICA tax​ covers Social Security and Medicare. The employer contributes ​6.2 percent​ for Social Security and ​1.45 percent​ for Medicare. The employees also contribute to the same amount.

FUTA tax​ covers unemployment insurance. Employers are required to pay ​6 percent​ of the tax. However, most FUTA taxes have a ​5.4 percent​ credit which means employers only pay ​0.6 percent​.

Payroll taxes that the employer collects and remits are categorized into federal income taxes and state and local taxes.

Read More​: How to Claim Zero on Taxes

How Your Florida Paycheck Works

If you’re employed, your employer withholds 6.2 percent of your salary as Social Security taxes and an ​additional 1.45 percent​ as Medicare taxes. Your employer also matches your monthly contribution. If you're self-employed, you'll be required to pay the self-employment tax, which is double the FICA taxes with half of those being tax-deductible. Those earning over $200,000 are required to pay an additional ​0.9 percent​, which the employer isn’t obligated to match.

President Donald Trump signed a new tax plan in 2017 which resulted in new guidelines on tax withholding from 2018. There weren’t substantial changes but it’s recommended to go over your W-4 form just to be sure.

In 2020, the IRS issued new guidelines. Instead of being requested to declare your total allowances, the revised W-4 forms require you to fill in your personal information, list dependents and list any additional income. Only employees who are hired from Jan. 1 and onward or those who are changing jobs will be required to fill the new W-4 forms.

Employers are mandated to withhold money from every payment cycle for federal taxes, which allows for installment payment of taxes as opposed to paying in a lump sum. The amount of money your employer withholds from your paycheck will be determined by earnings, marital status and the tax credits/taxable income you indicate on the W-4 form.

If you're contributing to a retirement plan, your employer may also withhold your taxes if you're instructed to do so. One advantage of a 401(k) contribution is that the money is pre-tax.

Another way to make pre-tax contributions is enrolling in flexible spending accounts (FSAs) and health savings accounts (HSAs). Employer-sponsored health insurance isn't pre-tax which will affect your income.

How You Can Change Your Florida Paycheck

If you want to earn more while in Florida, you can ask your employer for overtime, bonuses, commissions, stock options and supplemental wages. It’s important to note that supplemental income is not taxable in Florida. However, your employer is obligated to withhold federal taxes from your supplemental income.

To cushion more money from federal taxes while in Florida, you should consider a 401(k) plan which is funded with pre-tax contributions. You could also contribute to an FSA or HSA for any medical spending. It can also help to ask a tax adviser about other tax-friendly places you can invest your money in.