Seeing all the withholding that comes out of your paycheck can put a damper on an otherwise exciting event. Besides federal and state income taxes, your employer also takes out Social Security and Medicare taxes. To figure your withholding, you need to know your filing status and the number of allowances you claimed on your Form W-4 you turned in to your employer. Knowing how much you're going to lose to withholding helps you budget for what you'll have left over. On the bright side, if you have more withheld than you owe, you'll get it back when you file your taxes.
Subtract the amount of your year-to-date wages from the Social Security wage base to figure the portion of your paycheck that's exempt from the Social Security tax. If the result is larger than your current paycheck, the entire paycheck is subject to Social Security taxes. If it's negative, you won't have any Social Security taxes withheld. For example, in 2013 the limit is $113,700, so, if your year-to-date income is $60,000 including $5,000 from your current paycheck, subtract $60,000 from $113,700 to find you still have $53,700 in income that's subject to Social Security taxes, which means the entire $5,000 is hit.
Multiply the portion of your paycheck subject to Social Security tax by the Social Security tax rate, which is 6.2 percent as of 2013. In this example, multiply $5,000 by 0.062 to find that $310 is withheld for Social Security taxes.
Multiply your paycheck by the Medicare tax rate to figure your Medicare tax withheld. As of 2013, the rate is 1.45 percent, and it applies to all of your wages. In this example, multiply $5,000 by 0.0145 to find $72.50 is withheld for Medicare taxes.
Multiply the portion of your paycheck that exceeds the additional Medicare tax threshold for your filing status by the 0.9 percent rate, if applicable. As of 2013, the thresholds are $250,000 if you're filing a joint return, $125,000 if you're married filing separately or $200,000 if you're single or head of household. In this example, the wages are well below the threshold, so no additional Medicare tax is withheld.
Federal Income Taxes
Calculate your wages subject to income taxes by subtracting any pretax deductions, like employer-provided health insurance and contributions to 401(k) or 403(b) plans. For example, say you contribute $500 to your 401(k). Subtract $500 from $5,000 to find your wages subject to withholding are $4,500.
Located the income range for your taxable income on the table in IRS Publication 15 for your pay period and filing status. For example, if you're single and paid monthly, you use the Single Persons -- Monthly Payroll Period table.
Find your federal income tax withholding by finding the amount across from your income range in the column for the number of allowances you claimed on your W-4. In this example, $4,500 for a single person with two allowances is $577.
Unless you live in a state that doesn't have an income tax, your employer will also withhold for state income taxes. These formulas vary from state to state.
- Social Security Administration: Contribution and Benefit Base
- Social Security Administration: FICA & SECA Rates
- Internal Revenue Service: Questions and Answers for the Additional Medicare Tax
- Internal Revenue Service: Publication 15 -- Employer's Tax Guide
- IRS. "FAQs on the 2020 Form W-4." Accessed Oct. 16, 2020.
- IRS. "Tax Withholding for Individuals." Accessed Oct. 16, 2020.
- IRS. "Topic No. 753 Form W-4—Employee's Withholding Allowance Certificate." Accessed Oct. 16, 2020.
- Social Security Administration. "Fact Sheet Social Security." Accessed Oct. 16, 2020.
- Social Security Administration. "Contribution And Benefit Base." Accessed Oct. 16, 2020.
- IRS. "Topic No. 608 Excess Social Security and RRTA Tax Withheld." Accessed Oct. 16, 2020.
- IRS. "Publication 531 (2019), Reporting Tip Income." Accessed Oct. 16, 2020.
- IRS. "Group-Term Life Insurance." Accessed Oct. 16, 2020.
- IRS. "Questions and Answers for the Additional Medicare Tax." Accessed Oct. 16, 2020.
- Unless you live in a state that doesn't have an income tax, your employer will also withhold for state income taxes. These formulas vary from state to state.
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."