How to Calculate Salary After 401k
As part of its employee benefits plan, an employer may offer its employees a company-sponsored 401k plan. The employee chooses a flat or percentage amount that she wants allocated toward her 401k. Depending the type of plan, the employee can make contributions in pretax or after-tax dollars. Traditional 401k contributions are made on a pretax basis; Roth 401k contributions are made post-tax. The method for calculating salary after 401k depends on the type of plan.
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Instructions
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Calculate salary if contributions are pretax by withholding Social Security and Medicare taxes -- 4.2 percent and 1.45 percent of gross salary, respectively, at the time of publication. Traditional 401k contributions are subject to Social Security and Medicare tax withholding but not federal income tax withholding.
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Deduct traditional 401k contributions; this process reduces the employee’s taxable salary for federal income tax purposes.
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Withhold federal income tax according to the IRS Circular E tax-withholding table that matches the employee’s salary after 401k, plus his allowances, filing status and pay period (see Resources).
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Consult with the state revenue agency (see Resources) to find out if it regards traditional 401k contributions as taxable. If not, subtract the contribution from the employee’s salary after deducting Social Security and Medicare taxes. Then calculate state income tax according to the state revenue agency’s guidelines; this process lowers the employee’s taxable salary for state income tax purposes. The remainder is the employee’s salary after a traditional 401k contribution. If the contribution is taxable, deduct state income tax from the employee's salary before subtracting the 401k contribution.
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Calculate salary if the contribution is post-tax by subtracting Social Security tax, Medicare tax, and federal and state income tax from the employee’s gross salary. Then deduct the 401k contribution; this process does not reduce taxable salary for income tax purposes.
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Tips & Warnings
If an employee has additional deductions, subtract them from her salary to arrive at the take-home amount.
