How to Calculate Income Tax From a Salary

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The government regulates income tax rates.
The government regulates income tax rates. (Image: law courts image by Peter Helin from Fotolia.com)

The federal (and in most cases, the state government), requires employees to pay income tax on wages earned. Federal payroll taxes include Social Security tax, Medicare tax, and federal income tax. If the state charges state income tax, then the employee must pay state income tax. If you receive a salary, you most likely receive a fixed wage each payday. Consequently, your income tax deductions tend to stay the same.

Things You'll Need

  • IRS Publication 15
  • State Withholding Tax Tables
  • Social Security Tax Rate
  • Medicare Tax Rate

Check the IRS Publication 15/Circular E for the withholding tax tables needed to figure federal income tax. Perform an online search to obtain Publication 15, if necessary. You will also need your filing status and allowances for the relevant tax year. Consult Lines 3 and 5 of your W-4 form, if necessary.

Federal income tax withholding is a situational process, based on your salary, allowances, filing status and the federal tax tables. Suppose your weekly salary is $850 and you claim married with three allowances. According to the 2010 Circular E, your federal income tax would be $47.

Determine state income tax withholding, a process similar to federal income tax withholding. You must use your individual state income tax withholding tables (see Resources) and your filing status and number of allowances to figure the tax. Suppose you work in Rhode Island. You earn a biweekly salary of $1,500 and claim single with one allowance. The 2010 Rhode Island tax tables notes that your biweekly state income tax would be $47.54.

Compute Social Security tax at 6.2 percent. This applies to all gross wages, up to the yearly wage limit of $106,800. Say you earn a biweekly salary of $1,200. Calculation: $1,200 x .062 = $74.40, biweekly Social Security withholding.

Compute Medicare tax at 1.45 percent. This applies to all gross compensation. Calculation: $1,200 x .0145 = $17.40, biweekly Medicare withholding.

Tips & Warnings

  • Consult Publication 15 for the annual Social Security and Medicare tax rates. Your income tax amounts change only when you have a salary adjustment or a change in your deductions.

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