How to Figure Income Taxes After Pretax Deductions
If you have pretax deductions, these amounts are deducted before any taxes are calculated for your gross income. If you know how to calculate income taxes after pretax deductions, you can figure out your weekly or monthly net pay so that you know exactly how much money you will have on payday. This process is helpful for people who work different hours every week and never know how much their checks will be on payday.
Other People Are Reading
Instructions
-
-
1
Subtract all pretax deductions from your gross pay. This includes savings plans for retirement and health plans that qualify. This does not include union dues, employer-contributed insurance plans or garnishments. This is the total you will use to calculate federal and state income taxes. Social Security and Medicare are figured on the gross income before any pretax deductions.
-
2
Calculate Social Security tax using your gross income before pretax deductions. You pay 6.2% (.062) of your wages to Social Security and 1.45% (.0145) of your wages to Medicare.
For instance, if your gross pay is $500, you would calculate your Social Security tax as follows: $500 x .062 = $31 Social Security tax. Then figure your Medicare tax as follows: $500 x .0145 = $7.25 Medicare tax.
-
-
3
Calculate your federal tax withheld by using the total gross income after pretax deductions. Pretax deductions include 401k plans and any other deductions from your wages that are not subject to tax. Use Publication 15-T from Resources. Go to page 8 to start. To find your tax liability, follow the headings at the top of each table to locate the right one to use. We will use the example from Step 2.
If you are single and are paid biweekly, use the table on page 12. If you have a pretax deduction for a 401K, subtract the amount of the 401k deduction from your gross wage. For instance, if your gross pay is $500 and you contribute $25 a pay period to your 401k, you would calculate your wages subject to federal taxes as follows: $500 - $25 = $475 subject to federal taxes. Look this amount up in the tax table. For an income of $475, your federal tax liability is $24.
-
4
Calculate your state tax by using your state withholding table. For information on how much tax to calculate for your state, visit State Information for Withholding Tax in the Resources. For instance, if you live in Michigan, you have to pay 3.9 percent (.039) of the amount of your wages subject to federal tax.
As in Step 3, if your gross pay is $475 after deducting the pretax deductions, your state tax would be calculated as follows: $475 x .039 = $18.53 state tax.
-
5
Figure out your net pay by following this example: Your gross wage - your pretax deductions - federal tax - state tax - Social Security - Medicare = your total net pay.
-
1
Tips & Warnings
If you would like an easy way to calculate you net pay, Paycheck City does all the calculations for you.
Always remember that Social Security and Medicare are calculated on your gross pay before any deductions, including pretax deductions.
