Things You'll Need:
- Calculator
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Step 1
Understand that 401k monies are deducted from gross income before any federal or state taxes are deducted. However, Social Security and Medicare are withheld from the gross before the 401k deduction. Health savings accounts are not subjected to Social Security, Medicare or income tax withholding.
As an example, let's use Todd. He's married with no withholding allowances on his W-4 form, lives in Wisconsin and has a gross income of $658.58 for a 2-week period. Todd contributes $25 a pay period to a 401k plan and $25 to a health savings account. -
Step 2
Calculate the Social Security withholding from the example in Step 1by taking the gross income minus the health savings account deduction of $25. To figure out the Social Security, take the $658.58 minus $25 for a balance of $633.58.
Social Security withheld is 6.2 percent (.062) of the employee's gross income. So you take the $633.58 multiplied by .062, which equals $39.28. This is the deduction for Social Security. -
Step 3
Calculate the Medicare withholding by taking the gross income minus the health savings account of $25. Medicare withheld is 1.45 percent (.145) of the employee's gross income. Therefore, you take the $633.58 multiplied by .145, which equals $9.18. This is the deduction for Medicare.
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Step 4
Determine how much federal income tax will be withheld, depending on whether you're married or single. In the IRS Employer's Tax Guide (see Resources below), use the Publication 15 table on page 40 to determine how much federal tax will be withheld from your gross income after deducting the 401k or health saving account money.
Take the $658.58 minus $25 (401k) minus $25 (HSA), which equals $608.58. Look up the $608.58 in the Publication 15 table on page 42 for a married person (Todd is married) to find the federal tax. Since Todd claims zero withholding allowances, he owes $52 for federal tax on $608.58. -
Step 5
Calculate any state or local tax according to your state publication. State income tax is minus the 401k plan and the health savings account, which in this example is $50 for a balance of $608. 58. If you are unsure where to get your local or state tax for your state, use the Paycheck Calculator in Resources below to determine your state.
Since Todd lives in Wisconsin, he will pay $20.08 for state income tax. -
Step 6
Subtract $25 (401k), $25 (HSA), $39.28 (Social Security), $9.18 (Medicare), $52 (federal tax) and the $20.08 for state for a total net income of $488.04. If you have any insurance premiums, union dues, child support, alimony or garnishments, these are subtracted from the net income after all withholding are done.
