When you get your paycheck, you will notice that a significant amount of the money you are owed does not get paid to you. This is because of income tax withholding, which is when your employer keeps some of your paycheck to pay for your taxes, including FICO taxes for Social Security and Medicare, as well as federal income taxes and, if applicable, state income taxes. To calculate the taxes withheld form your paycheck, you need to know how many exemptions you are claiming.
Multiply your paycheck amount by 0.0765 to calculate the the amount of FICA taxes you are required to pay. For example, if you have a $3,000 monthly salary, you would owe $229.50 in FICA taxes.
Determine the number of exemptions that you are claiming on your W-4 form.
Divide the value of the exemption by the number of times per year you are paid. Each exemption reduces your annual income subject to take withholding by $3,650 for 2010, so if you are paid monthly, your income decreases by $304.17 for each exemption you claim.
Multiply the value of your exemption by the number of exemptions you claim. For example, if you claim two exemptions and make $3,000 per month, only $2,391.66 would be subject to federal income tax withholding.
Determine the amount of money withheld for federal income taxes by using the federal income tax withholding tables (See Resources). For example, if you were single and had $2,391.66 that was subject to withholding, $264.90 would be withheld for federal income taxes.
Determine the amount withheld for state income taxes, if applicable, by contacting your state department of revenue to find out the tax withholding tables.
Add the amount of FICA taxes, federal income taxes and state taxes withheld from your paycheck to determine the gross tax withholding on your paycheck.
If your tax situation changes, such as getting married or having a child, file a new W-4 form with your employer to update your tax withholding.
- Social Security Administration: Social Security Update 2010
- Taxpayer Advocate Service, "Vol. 2, TAS Research and Related Studies: A Conceptual Analysis of Pay-As-You-Earn (PAYE) Withholding Systems as a Mechanism for Simplifying and Improving U.S. Tax Administration," Page 11. Accessed April 1, 2020.
- Internal Revenue Service. "Understanding Taxes -- Theme 2: Taxes in U.S. History." Accessed April 1, 2020.
- Internal Revenue Service. "Form W-4," Accessed April 1, 2020.
- Tax Foundation. "State Individual Income Tax Rates and Brackets," Pages 1–10. Accessed April 1, 2020.
- Social Security Administration. "Contribution And Benefit Base," Accessed April 1, 2020.
- U.S. Congress. "H.R. 748 - CARES Act." Accessed April 1, 2020.
- If your tax situation changes, such as getting married or having a child, file a new W-4 form with your employer to update your tax withholding.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."