What Percentage of a Salary Is Lost to Taxes?

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They say that nothing is certain than death and taxes, and that is certainly true in the United States. Workers in the U.S. are subject to a number of payroll taxes that effectively reduce the amount paid by their employer. You can see the impact of not only these taxes, but also deductions for health insurance and disability, just by comparing the gross pay amount on your pay stub to what you actually put into your bank account.

Progressive Income Tax

The United States uses a progressive income tax system, meaning that workers who earn a larger salary pay a higher percentage of their paychecks in taxes. As of the 2011 tax year, there are six tax brackets, ranging from 10 percent for single people making up to $8,500 and married couples earning up to $17,000, to 35 percent on those whose incomes exceed $379,150.

Social Security Tax

The government uses a payroll tax to fund Social Security for senior citizens and the disabled. The cost of this tax is shared between the employer and the employee, which each paying half of the levy. The normal rate for both the employer and the employee side of the Social Security tax is 6.2 percent, for a total tax of 12.4 percent. However, for 2011 the employee side only has been lowered to 4.2 percent, so you can expect to see 4.2 percent of your gross pay go to pay this tax.

Medicare Tax

The Medicare program that pays the cost of doctor visits and hospital stays for seniors is also funded by a payroll tax that is shared between employer and employee. The total tax for the Medicare system is 2.9 percent, but as an employee you pay only half this amount. That means 1.45 percent of your gross pay goes to the Medicare tax. You can see the impact of this tax each time you receive your paycheck. Just look for the "Medicare Tax" section on your pay stub to see how much you pay.

State and Local Taxes

State and local taxes can take another bite out of your paycheck. While a handful of states, including Alaska and Nevada, do not levy a state income tax, the vast majority of states do. The percentage you pay varies from state to state, with the amount set by the state legislature. Some states use a progressive income tax system similar to the federal government's, meaning that those with higher incomes pay a larger percentage to the state. Other states use a flat system of taxation, meaning that you pay a flat rate regardless of how much you earn.

In addition to state taxes, expect to pay a tax to the municipality where you live. This rate varies as well, and you can see the deduction reflected in your paycheck under the "Local Tax" section.

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