Federal taxes are something that few workers in the U.S. can avoid. Luckily, if you’re a resident of Texas, at least you do not have to worry about having state or local (city) income tax taken out of your payroll. Texas is one of several states that do not tax income, so as far as your paycheck is concerned, you have only federal obligations such as federal income tax, Medicare and Social Security contributions to contend with.
The Percentage of Taxes Taken Out of a Paycheck in Texas is Limited to Federal
Taxes and deductions from your paycheck fall into two categories – voluntary and involuntary. Mandatory withholdings from your earnings are required by the federal, state or local agencies. These generally include any applicable state or federal income taxes, in addition to child support or other similar orders. Texans should see no state or local income taxes deducted from their payroll. The rate at which you’re taxed federally, however, depends on several factors.
The Federal Insurance Contributions Act, otherwise known as FICA, is a mandatory federal payroll tax that employees can expect to be deducted from each paycheck. FICA taxes go towards providing benefits for current Social Security and Medicare recipients. Any excess goes into Social Security trusts to be used for future retirees and beneficiaries of benefits. Currently, the amount of Social Security taxes withheld from your payroll is 6.2 percent of your gross wages up to a certain amount; for 2018, only wages up to $128,400 are subject to Social Security tax. Medicare is taxed at 1.45 percent of your gross wages. Both the employer and the employee make contributions to FICA; if you're self-employed, you pay double the FICA.
After mandatory federal payroll deductions like FICA and federal income tax, you might notice other items deducted from your pay, too. These deductions for contributions to medical, dental or life insurance premiums and retirement plans, such as your 401(k), are chosen by you, the employee. Your employer may match some of these contributions, such as for your 401(k), retirement plan or medical and life insurance premiums. Voluntary payroll deductions must be approved by the employee in writing prior to any of these deductions being withheld.
You can use an online pay calculator, including a paycheck calculator for Texas specifically, to determine your tax obligations and what your net take home pay will be.
2018 Tax Rates
Federal income tax rates are different for different income levels, or "brackets". Taxes are assessed cumulatively, so each level of your income is taxed at a different rate and then added together. The brackets recently changed for the 2018 tax year under the Tax Cuts and Jobs Act. For a single individual taxpayer, the brackets are as follows:
- The first $9,525 of your annual income is taxed at 10 percent;
- Your income between $9,525 and $38,700 is taxed at 12 percent;
- Your income between $38,700 and $82,500 is taxed at 22 percent;
- Your income between $82,500 and $157,500 is taxed at 24 percent;
- Your income between $157,500 and $200,000 is taxed at 32 percent;
- Your income between $200,000 and $500,000 is taxed at 35 percent; and
- Your income above $500,000 is taxed at 37 percent.
For example, if you make $38,701 per year, you will be taxed 10 percent on the first $9,525 for tax of $952.50 and 12 percent on the next $29,175 for a tax of $3,501, and oddly, 22 percent on the last dollar, or 22 cents, for a total tax of $4,453.72.
2017 Tax Rates
For the 2017 tax year (and tax returns due in 2018), the tax brackets for a single individual were as follows:
- The first $9,325 of your annual income is taxed at 10 percent;
- Your income between $9,325 and $37,950 is taxed at 15percent;
- Your income between $37,950 and $91,900 is taxed at 25 percent;
- Your income between $91,900 and $191,650 is taxed at 28 percent;
- Your income between $191,650 and $416,700 is taxed at 33 percent;
- Your income between $416,700 and $418,400 is taxed at 35 percent; and
- Your income above $418,400 is taxed at 39.6 percent.
- SmartAsset: Texas Paycheck Calculator
- Patriot Software: What Is a Pay Stub, and What Is on a Pay Stub?
- Inc.: Tax Withholding
- Social Security Administration: What is FICA?
- Soution Services, Inc.: Payroll Deductions – Mandatory vs. Involuntary
- IRS: Publication 554 (2017), Tax Guide for Seniors - 2017 Filing Requirements Chart for Most Taxpayers
- IRS: Publication 505 (2018), Tax Withholding and Estimated Tax
- Forbes: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More