How to Calculate a Salary After Taxes
Being able to calculate a salary after taxes is an essential life skill. This calculation can help you with budgeting and financial planning decisions whether you are considering a new job or simply moving up within the same company. Knowing how much take-home pay you will receive after mandatory taxes are deducted will give you a clear understanding of what your net income will be for any proposed salary offer.
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Instructions
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Medicare and Social Security Tax
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Verify the current Medicare tax and Social Security tax withholding rates by locating them on the Social Security Administration's website at SSA.gov. As of 2010, employers withhold federal Social Security taxes of 6.2 percent from employees' wages, up to $106,800 (after reaching a salary of $106,800 in 2010, no additional Social Security tax will be deducted for the year) and Medicare taxes of 1.45 percent on all wages earned.
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Convert withholding percentages to a decimal by moving the decimal point on each two places to the left. For example, the 2010 Medicare withholding rate is 1.45 percent. After moving the decimal place two points to the left, the decimal to use in your calculation is .0145.
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Multiply the proposed gross income for the pay period by the decimal withholding rate to calculate the Medicare tax and Social Security tax withholding amounts. For example, a weekly gross income of $600.00 times the Medicare deduction of .0145, is $8.70, and $600.00 times the Social Security deduction of .062 equals $37.20.
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Add the two calculated deductions together for the total Medicare and Social Security tax (FICA) that will be deducted from your salary.
Federal Witholding Tax
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Locate the income tax withholding tables (called the wage bracket method) on the current year's Publication 15 (Employer's Tax Guide) on the Internal Revenue Services' website at IRS.gov.
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Locate the table for your proposed pay period. There are different tables for daily, weekly, biweekly, semimonthly and monthly pay periods.
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Locate the table for your filing status. There are different tables for single and married taxpayers.
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Locate your withholding allowance column on that table. For example, when completing your current year's W-4 (Employee's Withholding Allowance Certificate), if line H (or one of the supplemental deduction and adjustment worksheets) equals four, your withholding allowance is four.
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Locate your federal withholding tax, which will be listed across from your proposed salary amount and under your withholding allowance on that table. For example, if your proposed salary is $600.00 per week, your filing status is single and your withholding allowance is one, your federal tax deduction will be $57.00.
State Withholding Tax
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Locate the income tax withholding tables for your state or the state where you will be receiving wages on the state's division of taxation website.
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Locate the state withholding tax table which contains your proposed pay period, filing status and withholding allowance.
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Locate the amount of state withholding tax which will be deducted from your gross salary on that table. For example, if you will be working in the State of Rhode Island, your salary will be $600.00 per week, you are single and your state withholding allowance is one, your state tax deduction will be $17.77.
Annual Salary After Tax Calculation
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Divide the proposed annual salary by the pay period frequency (how many times you will receive a paycheck in a year). For example, if your annual salary is $31,200.00 and you will be paid weekly (52 times within the year), your weekly salary is $600.00.
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Subtract the calculated tax deductions for Medicare, Social Security, federal and state taxes from your pay period salary. For example, a $600.00 salary minus $8.70 for Medicare, $37.20 for Social Security, $57.00 for federal and $17.77 for state taxes is a weekly salary of $479.33 per week after taxes.
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Multiply the pay period salary after taxes by the pay period frequency to calculate your annual salary after taxes. For example, if your weekly salary after taxes is $479.33 and your pay period frequency is weekly (or 52 times per year), your annual salary after taxes is $24,925.16.
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Tips & Warnings
Certain voluntary deductions, like qualified 401(K) deductions, reduce your gross taxable income. Be sure to ask which voluntary deductions are deducted before tax, subtract them from your salary and use that reduced number as your gross salary.
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