How to Calculate Your Take Home Pay
Whenever you start a new job or get a pay increase, don’t forget that the salary or hourly rate your employer gives you is quoted as your gross pay and not your take home pay. To figure out how much money you will actually have in your paycheck each pay period, you’ll need to calculate your take home pay after deductions and taxes. Your take home pay or your net pay is defined as your actual wage or salary after deductions have been taken out for Federal, State and Local taxes, insurance, contributions to your retirement plan or flexible spending account and any withholdings for things like child support, uniform allowance, loan repayment, etc.
How Much of Your Gross Pay Goes Towards Taxes?
Ever wonder how much of your gross pay goes towards taxes? Do you think it is 30%, 40% or 50% of your gross pay? According to a study done by The National Bureau of Economic Research, on average, most workers pay about 40% in taxes. This includes a combination of Federal, State and Local government taxes. Want to figure out how much money will end up in your paycheck?
The easiest way to estimate your take home pay or net pay is to use our free paycheck calculators… choose from a salary paycheck calculator or an hourly paycheck calculator depending on how you are paid. All you have to do is input the required information and the payroll calculator will do the rest… giving you a pretty good estimate of what your take home pay would be.
What Taxes are Taken Out of My Gross Pay?
There are several taxes or mandatory deductions taken out of your gross pay. If you have elected pre-tax deductions, these may be subtracted from your gross pay before your Federal, Social Security, Medicare, State and Local taxes are calculated.
- Federal Taxes – This income tax varies depending on, among other things, whether you claim single or married, how many allowances you claim and what tax bracket you are in.
- Social Security – 6.2% of your gross pay.
- Medicare – 1.45% of your gross pay.
- State Taxes – Each state has different income tax rates and some states don’t withhold any taxes. The state tax withheld from your check depends on the state you reside in and/or work in. For those states that do impose an income tax, Illinois has the lowest maximum rate which is a flat tax of 3%. If you live in the state of Hawaii, you have the highest state income tax rate and are looking at a maximum rate of 11%. In addition to state income taxes, employees may also be required to contribute to their state unemployment/disability tax fund.
- Local Taxes – Only a few states impose their own city, county and other local income taxes. If you happen to live or work in one of these localities, you may find yourself paying an additional withholding tax.