Almost everyone who works for a paycheck has taxes deducted each payday. There is no single percentage of taxes taken out of your paycheck. That is because there are several taxes, each calculated differently. Plus, federal and many state income tax rates vary depending on how much you earn, your filing status and the number of withholding allowances you claim.
Your tax withholdings depend on a variety of factors, including how many allowances you claim and your state and federal income tax rates. Information concerning your specific income tax bracket is made freely available by the IRS.
Paycheck Tax Calculator
Social Security tax and Medicare tax are two federal taxes deducted from your paycheck. The Social Security tax is 6.2 percent of your total pay until you reach an annual income threshold. The percentage rate for the Medicare tax is 1.45 percent, although Congress can change it. Medicare tax is levied on all of your earnings, with no upper income threshold or limit.
The federal income tax you pay depends partly on how much of your paycheck is considered taxable income. Taxable income is the amount left over after withholding allowances and other tax-exempt amounts are subtracted from your total pay. Also, the percentage of federal income tax deducted from your paycheck rises as your taxable income increases. The percentage tax rises in each successive tax bracket until it reaches a maximum.
If you’d like to calculate the overall percentage of tax deducted from your paycheck, first add up the dollar amounts of each tax withheld. Divide the total of your tax deductions by your total, or gross, pay. Multiply the result by 100 to convert it to a percentage.
Exceptions for State and Local Taxes
Most states and some local governments also levy income taxes. Each state or local government has its own formula for figuring its income tax. To find out how these taxes on your paycheck are calculated, contact your state and/or local government department of revenue or taxation. You can also use your state's calculator to determine exactly how much you're paying each year in taxes. If you live in California, for instance, you can use the California tax calculator to determine exactly how much you'll pay in taxes each year, which will help you find out if your withholdings are in line with that.
2018 Tax Law Changes
Due to the Tax Cuts and Jobs Act, you may see a change in the taxes coming out of your paycheck. The income tax brackets have shifted, with those making between $38,701 and $82,500 owing taxes of $4453.50 plus 22 percent of the amount over $38,700. The 24 percent tax bracket has those making between $82,501 and $200,000 paying $14,089.50 plus 24 percent of the amount over $82,500. This can necessitate a need to adjust how much is being withheld throughout the year, so the IRS has also updated the withholding tables to ensure that enough is being taken out to cover you at tax time.
2017 Taxes and Income Considerations
If you're still filing 2017 taxes, it's important to pay attention to the limits specific to that year. The income threshold for 2017 was $127,200. One withholding allowance was $4,050 annually or $77.88 per week in 2017. If you claimed two allowances and you’re paid weekly, you would subtract $155.77 from your total weekly pay to find your taxable income for figuring federal income tax. Also in 2017, the first $44 per week was not taxed. Federal income tax was 10 percent of your weekly taxable income from $44 to $224. From $224 to $774 per week, the percentage was 15 percent.
- Forbes: IRS Releases New 2018 Withholding Tables To Reflect Tax Law Changes
- Forbes: What The 2018 Tax Brackets, Standard Deductions And More Look Like Under Tax Reform
- IRS: Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding
- State of California Franchise Tax Board: Tax Calculator, Tables and Rates
- 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.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.