How Much Does My Paycheck Have to Be Before Federal Taxes Are Taken Out?

by Grace Ferguson ; Updated July 27, 2017

Federal income tax is a type of tax the federal government imposes on personal earnings. As an employee, you are required to pay federal income tax, unless you are exempt; your employer is also required to withhold it from your paychecks. Federal income tax withholding is based on varying conditions.

Determination

Your federal income tax withholding depends on your wages, the information you put on your W-4 form and the IRS withholding tax tables (Circular E). All of these conditions determine your withholding amount, which is not based solely on the amount of money you earn. To figure the amount that you have to make for federal income to be withheld, examine all of the conditions collectively. In general, the more wages you earn, the more taxes you pay. However, each allowance you claim on your W-4 gives you an amount, which lowers your taxable income. Further, claiming married or head of household puts you in a lower tax bracket than claiming single.

Calculation

If you have no allowances, your withholding is based on your income and filing status. For example, you claim single in 2011 and are paid biweekly. For $12 to be withheld biweekly from your paychecks, you need to earn $200 — see page 42 of IRS Circular E. But if you claim married and have two allowances, you pay no federal income tax — see page 44 of IRS Circular E. If you are exempt, you pay no federal income tax. But you must meet the criteria stated on the W-4 form for the respective tax year to qualify for exempt.

W-4 Adjustment

As a convenience to employees and to help them not overpay or underpay federal income tax, the IRS has an online withholding calculator that you can use to figure out if you need to give your employer a new W-4. The calculator shows you how to adjust the withholding conditions on your W-4 so you pay the right amount of federal income tax.

FICA Taxes

Medicare and Social Security taxes are federal payroll taxes that the Federal Insurance Contributions Act authorizes the IRS to collect. These taxes are based on flat percentages; therefore, as long as you have income, you pay Social Security and Medicare taxes. For example, you earn $500 weekly. Since Medicare is based on 1.45 percent of all your taxable income, Medicare tax withholding is $7.25 weekly. But if you earn only $100 weekly, you pay $1.45.

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.