How to Calculate Federal Income Tax Withholdings

Learning to calculate your Federal income tax withholdings can save you time and money. By correcting your withholdings based on your calculations you might be able to add more money to each paycheck. Conversely, if you're surprised with a large tax bill at the end of the year you can adjust those numbers to have more money withheld.

Instructions

Difficulty: Moderately Easy

1. Locate your tax status on your W-4 form.
2. Start with your gross pay and subtract your flexible spending amount for child care or health care, if you participate in those programs. The amounts of money you contribute to these programs is taken from your gross pay prior to taxes being calculated; therefore, they are not included as a part of your taxable income.
3. Subtract the appropriate amount for each exemption you claim from your gross income.
4. Find a Federal income tax chart and calculate your income tax according to the appropriate bracket. As a rule of thumb, your taxes amount to approximately 30 percent of your income with no withholdings of any kind. Remember that whether you claim as single or married will alter this percentage.

Tips & Warnings

• If you typically receive a large refund, experts agree you should lower your withholdings so you have that money throughout the year rather than allowing the government to use it interest free. For every $250 you receive, decrease your withholdings by one.