The amount of federal tax that’s withheld from your paycheck depends on which federal taxes you are talking about and your individual tax situation. There are three federal payroll taxes: income tax, Social Security and Medicare. Your filing status, income and the number of withholding allowances you claim all affect how much is taken out in federal taxes.
Social Security and Medicare
As of the date of publication, employers withhold 6.2 percent on the first $118,500 of gross wages. Gross wages means all of your compensation from a job -- wages or salary plus additional amounts like tips, commissions and bonuses. Earnings that exceed the $118,500 mark aren’t subject to Social Security tax; this income limit is adjusted annually to keep up with inflation. The tax rate for Medicare is 1.45 percent of gross wages with no income cap. In fact, employers withhold an extra 0.9 percent in Medicare tax on gross wages in excess of $200,000.
Only part of gross wages is subject to federal income tax withholding. The taxable portion is determined by the number of withholding allowances you claim on the W-4 form you fill out and give to your employer. At the time of publication, each withholding allowance excluded $4,000 from your annual pay for tax withholding purposes. The amount excluded each payday depends on the number of pay periods. If you are paid weekly, divide $4,000 by 52 for a weekly withholding allowance of $76.92. Suppose you make $800 a week and claim two allowances. Subtract $153.84 from $800. Your employer figures federal income tax on the remaining $646.16. Taxable wages may be further reduced if you can deduct other amounts, such as contributions to a 401(k) plan.
Federal Income Tax Withholding
The percentage of federal income tax taken out of taxable wages starts at zero and increases in a series of steps called tax brackets to a maximum of 39.6 percent. Suppose you are single, claim two withholding allowances and make $800 per week. Your taxable pay equals $646.16. Tax on the first $44 is zero. Your employer deducts 10 percent of the amount from $44 to $222, or $17.80. The remaining $424.16 falls into the 15 percent tax bracket, so that’s another $63.62 withdrawn. Adding the amounts together, you find that $81.42 must be taken out of your pay for federal income tax.
Marital Status and Tax Rates
The filing status on a W-4 form affects the rate your employer uses to figure federal income tax withholding. Married workers pay a lower rate, except for those who are in the 39.6 percent tax bracket, which at the time of publication started when taxable wages topped $9,105 per week. For example, an employee with taxable wages of $800 was in the 25 percent tax bracket in 2015 if she was single. If she was married, the tax bracket was 15 percent.
How Extra Pay Is Taxed
A large jump in pay due to overtime, receiving a big raise or getting a bonus can shove you into a higher tax bracket. Suppose your gross wages were $800 with taxable wages of $646.16 one week, putting you in the 15 percent range when filing as single. You work an overtime shift one week, racking up eight hours at time and a half. That’s $240 in extra pay. The overtime is added to your taxable wages, bringing them to $886.16. The 25 percent tax bracket starts at $764 for single filers, so your employer takes out 25 percent on $122.16 of the overtime pay for federal income tax.