How Do I Calculate My Payroll Tax Deductions?

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You can calculate your payroll tax deduction by using both IRS tax tables and/or charts and stipulated percentage-based tax rates. You need to prepare yourself by knowing your tax filing status, which you can obtain from your prior year's IRS tax return. Your total payroll federal tax deduction includes federal withholding tax, Medicare tax and FICA (Social Security) tax; your state may also tax your income depending on where you live.

Gross Pay

Know your gross pay amount. Have your pay stub available or your employment contract. Gross pay may also be called Gross Earnings or Total Earnings. Your gross pay is the total amount of what you earn during the pay period before any taxes or deductions are taken out. For wage earners, it is the amount of hours worked times your hourly rate. If you receive a salary, you can take your annual salary and divide it by the number of payrolls for the year to arrive at your gross pay for the period. Your gross pay is used in calculating all of your payroll tax deduction amounts.

Payroll Taxes

Determine federal withholding tax. The IRS sets this amount, you cannot calculate it. It is included in your total payroll tax deduction amount. You need to know your filing status and number of exemptions since these two factors play a role in determining your federal withholding tax amount. For the tax amount, look in the Tax Tables from your 1040 tax return, or you can look on the IRS website.
Determine Medicare tax. Your employer pays half of this, while you pay the other half. If you are self-employed, you pay the entire amount (2.9 percent). To calculate your portion of the Medicare payroll tax, take your gross pay and times it by 1.45 percent (.0145), according to the IRS. This is your Medicare tax deduction. Medicare tax is based solely upon your gross pay. Determine FICA/Social Security. For your portion, take your gross pay times 6.2 percent (.0620). If you are self-employed, you are responsible for the entire amount of your FICA/Social Security tax figure, which is 12.4 percent. You actually are paying into your own Social Security account. FICA is based solely on your gross pay.

Final Calculation

Total your payroll tax deductions. Federal withholding plus Medicare tax plus Social Security tax will be your total payroll tax deduction amount. This is your total federal payroll tax deduction. Again, depending on where you live, your state may also tax your income. Subtract this total figure from your gross pay to arrive at your take home pay (also called your net pay).