Does Your Paycheck Vary? How To Calculate Income Tax Deductions Anytime

Whenever someone starts a new job or is an hourly employee they often have a hard time determining how to calculate income tax deductions  and how much of their paycheck they will actually get to keep.  Many people live paycheck to paycheck, which compounds the problem, and since some of them do not work the same amount of hours each week they cannot plan ahead.  In the past it has been difficult to determine estimates for paycheck deductions, but now you can get extremely close (within pennies) with available tax tools.

These are just a few of the available free tax tools:

Salary Tax Calculator

Hourly Federal Tax Calculator

The Numbers Behind Federal Income Tax Deductions

net pay calculator income tax deductions

Don’t be frustrated, plan ahead with a paycheck estimate of income tax deductions

Federal income tax deductions consist of fixed percentages and variable withholding amounts.  Income taxes such as Social Security and Medicare are fixed percentages, which means the percentage doesn’t change based upon how many children or dependents you have.  Social Security and Medicare percentage amounts deducted from your paycheck are simply set by the government.

Your paycheck may label them as FICA, Med-FICA, OASDI, Social Security, or Medicare but together they make up a combined 7.65% deducted from your gross paycheck if you are a W-2 employee.  Medicare deductions make up 1.45% of that total taken from your gross amount.  Medicare is healthcare for the elderly, while Social Security is payments to disabled and elderly individuals for living expenses.  Social Security deductions make up the other 6.2% deducted directly from your gross wages.  To illustrate using a simplified example, if you make $1,000 gross wages in a week $76.50 would go towards Social Security and Medicare as a whole assuming you had no other pre-tax deductions from your paycheck.  Pre-tax deductions like 401K contributions come out before the 7.65% is calculated.

The other income tax deductions are a little more complicated because they are based on your withholding amounts (how many dependents you claim, how you file your taxes, etc.).  Traditionally, this variance with filing status and dependents being claimed is the reason it has been more complicated to calculate hourly paycheck deductions or for income streams that vary every paycheck.

Not anymore!

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