How to Calculate Wages Minus Taxes

by K.A. Francis ; Updated March 15, 2018

Everyone likes to know how much money they're bringing home on payday. The excitement and anticipation are even higher when it's your first paycheck from a new employer. If you don't want to wait out the pay period, you can estimate your tax liability to calculate your take-home pay. One way is to look at an old pay stub from a previous job, find your withholdings and divide that amount by the gross income. This provides the percentage of each type of tax that was withheld at your last job. Subtract that percentage from the gross income at your new job to get a general idea of your net income. If you don't have an old pay stub, there are other ways you can estimate your net income.

Calculate Your Regular Gross Wages

To determine your gross wages, multiply your total hours worked by your hourly wage. For example, you work 34 hours a week and you earn $9 per hour. Your gross wages are $306 (34 hours x $9 per hour = $306). If you earn a salary, skip this step because your salary is your gross income, but in the event, you are awaiting your first paycheck, divide your annual salary by 52 to calculate your weekly salary. For example, if your salary is $50,000 a year, divide that amount by 52. Your weekly gross earnings are $961.54.

Calculate Overtime Pay and Total Wages

If you work overtime (any hours over 40 hours a week), those hours are calculated using your overtime rate. In most cases, the overtime hourly rate is 1.5 times your regular rate of pay (also referred to as "time-and-a-half" pay). Let's say you work 48 hours in one week, and you make $9 per hour. The first 40 hours are calculated using your regular hourly rate (40 x $9 = $360). The eight hours over the regular 40 hours is calculated at the overtime hourly rate of $13.50 for a total of $108 ($13.50 x 8 = $108). Your total wages for the week are $468 ($360 + $108).

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Calculate Your Yearly Income

Now that you know your weekly gross income, you can calculate your annual income. To calculate this, take your weekly gross income and multiply it by 52. If you're paid biweekly, multiply your biweekly gross income by 26. Your annual gross income is one element that determines your tax bracket.

Determine Your Filing Status and Tax Bracket

Pick your tax bracket according to your yearly income calculation and filing status. For instance, if you earned $23,336 and your filing status is Single, you are in the 15 percent tax bracket. In other words, 15 percent of your gross income is withheld from your pay for federal income taxes. Here is the breakdown of tax brackets based on annual income:

  • $0 – $9,525 =  10 percent 
  • $9,526 – $38,700 =  15 percent
  • $38,701 – $93,700 =  25 percent
  • $93,701 – $195,450 = 28 percent
  • $195,451 – $424,950 =  33 percent
  • $424,951 – $426,700 =  35 percent
  • $426,701 and above  =  39.6 percent

Now that you know your tax bracket, you can apply the rate to your weekly gross income and figure out how much federal tax will be withheld. In the case of the previous example, $70.20 is withheld from the $468 gross weekly income ($468 x 15 percent = $70.20).

Calculate and Deduct Other Taxes

Although Federal taxes are usually the largest single percentage deducted from your gross income, other taxes are withheld each pay period. Social Security and Medicare are also withheld from your pay at rates of 6.2 and 1.45 percent respectively. If you live in a state that collects state income tax, it is deducted too. Also, county, city and other local taxes might be withheld as well. The best way to know exactly which types of taxes are taken out of your paycheck is to look at the "withheld" portion of your pay stub.

About the Author

K.A. Francis is a freelance writer with over 20 years experience, and a small business consultant and jewelry designer. She holds a Bachelor of Arts in English and business administration and a Master of Arts in Adult Education. She has written for "The Einkwell," "Windsor Parent," MomsOnline, Writer's Stew, Lighthouse Venture Group and others. Her jewelry design company, KAF Creations, has been in operation since 1998.

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