If you recently started a new job, you may notice that your salary is lower than the wage that was offered to you at hiring. This is a normal part of working life, and it reflects the taxes you pay to the federal, state, and local governments. Estimating your tax burden can help you predict more accurately the salary you will receive.
Calculating Your Net Salary
You need some information to calculate your net salary:
- Your gross wage amount.
- Your number of personal exemptions.
- Your tax filing status.
- Other payroll deductions.
How to Calculate Taxable Income
There are two steps to calculate your taxable income:
- Calculate Social Security taxes (FICA).
- Subtract the standard deduction.
Calculating Social Security Taxes (FICA)
Social Security taxes (FICA) represent your contribution to Social Security and Medicare programs. Everyone pays a fixed rate of 7.65% on the first $147,000 earned in 2022 (which increases to $160,200 in 2023). You can reduce your annual gross wage by this percentage before making other calculations. Employers pay half of your FICA taxes, so self-employed individuals must pay the full 15.3%.
Amount of Standard Deduction
Next, subtract the standard deduction. For individual taxpayers filing separately or single, the standard deduction is $12,950 in 2022. For married couples filing jointly, the standard deduction is $25,900 in 2022. For heads of household, the standard deduction is $19,400 in 2022. It should be noted that the standard deduction is higher for taxpayers who are over age 65 or who are visually impaired.
Calculating Income Taxes
Several taxes apply to gross wage, including federal, state, and local income taxes.
The amount of federal tax you pay will depend on your tax filing status and tax bracket. Federal income tax rates range from 10% to 37%. It should be noted that federal tax brackets are progressive, which means different percentages are paid on different amounts of income. For example, if you are filing separately and have an income of $60,000 (after the standard deduction), you would owe 10% on the first $10,275 of income; 12% on the amount from $10,276 to $41,775; and 22% on the amount from $41,776 to $60,000. You can use your income amount in an effective tax calculator, which does all the calculations for you, for an estimate.
Other Post-Tax Payroll Deductions
Don’t forget to also subtract any other relevant deductions. Depending on whether they are pre-tax or post-tax deductions, you can deduct them from your salary before or after calculating the tax due. For example, a 401(k) retirement plan is considered a pre-tax deduction, so if you contribute 6% of your salary, subtract that amount from your gross pay before calculating taxes. For insurance payments for healthcare that you pay, they are usually deducted from gross pay before tax is withheld. For union dues and other withholdings, you can check whether they are made pre or post-tax or use estimates for these figures.
Final Calculations
To determine the total amount withheld from your pay, add the amounts you calculated for FICA taxes, income taxes, and other deductions, then subtract that total amount from your annual gross pay. What remains is your net salary. Divide both total deductions and net salary by the number of pay periods in the year to determine how much these amounts are in each paycheck. Online resources can help simplify the process. Once you are familiar with the people taking part of your pay and how much that portion is, you can easily determine your net salary using an online paycheck calculator.
Questions
Frequently Asked Questions (FAQs)
Some frequently asked questions about calculating net salary:
- What will my net salary be after taxes?
- What is the average annual net salary in Florida?
- How much of my net salary should I pay for a mortgage?
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Source: https://www.thebalancemoney.com/how-to-calculate-your-take-home-pay-2061914
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