Payroll Calculator

Your take-home pay is reduced by various mandatory and voluntary deductions:

• Mandatory deductions include federal income tax, Social Security tax (6.2%), Medicare tax (1.45%), and state/local income taxes where applicable.
• Voluntary deductions might include retirement plan contributions, health insurance premiums, HSA/FSA contributions, life insurance, and other benefits.

For a typical employee, these deductions can amount to 25-30% of gross pay. Higher income earners might see even more withheld due to progressive tax rates.

While it can be surprising to see how much is deducted, remember that many of these deductions (especially retirement contributions and certain insurance premiums) represent payments toward your future financial security or current benefits that would otherwise require out-of-pocket spending.

You can adjust your federal tax withholding by submitting a new W-4 form to your employer. The current W-4 form no longer uses allowances but instead asks for specific information about your tax situation, including:

• Multiple jobs or working spouse
• Dependents and eligibility for child tax credits
• Other income not subject to withholding
• Deductions beyond the standard deduction
• Any additional amount you want withheld from each paycheck

If you want more tax withheld (resulting in a smaller paycheck but potentially a larger refund), you can specify an additional withholding amount on line 4(c) of the W-4.

If you want less tax withheld (larger paycheck but potentially owing taxes when filing), you can claim deductions on line 4(b) or claim dependents if eligible.

For state tax withholding, you'll need to complete your state's equivalent form. Contact your HR or payroll department for guidance on both federal and state withholding adjustments.

Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive overtime pay for hours worked beyond 40 in a workweek at a rate of at least 1.5 times their regular pay rate. Here's how it's typically calculated:

1. Determine the regular rate of pay: This is your hourly wage or, for salaried non-exempt employees, your weekly salary divided by the number of hours that salary is intended to compensate.
2. Calculate the overtime premium: Multiply the regular rate by 0.5 (to get the additional half-time) for each overtime hour.
3. Compute total overtime pay: Multiply the regular rate by 1.5, then multiply by the number of overtime hours.

For example, if you earn $20 per hour and work 45 hours in a week:

• Regular pay: 40 hours × $20 = $800
• Overtime pay: 5 hours × ($20 × 1.5) = 5 hours × $30 = $150
• Total pay: $800 + $150 = $950

Note that some states have additional overtime requirements, such as daily overtime thresholds or double-time pay in certain circumstances. California, for instance, requires overtime for work beyond 8 hours in a day and double-time for work beyond 12 hours.

Pre-tax deductions are taken from your gross pay before taxes are calculated, reducing your taxable income. This means you pay less in income taxes. Common pre-tax deductions include:

• Traditional 401(k), 403(b), and other retirement plan contributions
• Health insurance premiums (in most cases)
• Health Savings Account (HSA) contributions
• Flexible Spending Account (FSA) contributions
• Certain commuter benefit programs

Post-tax deductions are taken after taxes have been calculated and withheld. These do not reduce your taxable income. Common post-tax deductions include:

• Roth 401(k) or Roth 403(b) contributions
• Disability insurance premiums (in most cases)
• Life insurance beyond employer-provided coverage
• Garnishments (court-ordered deductions)
• Charitable contributions through payroll

Pre-tax deductions generally provide immediate tax savings, while post-tax deductions like Roth retirement contributions offer potential tax advantages in the future (tax-free withdrawals in retirement). The best mix of pre-tax and post-tax deductions depends on your current tax situation and long-term financial goals.

While both are withheld from your paycheck, payroll taxes and income taxes serve different purposes and have different structures:

Payroll taxes:

• Include Social Security (6.2%) and Medicare (1.45%) taxes, collectively known as FICA taxes
• Are flat taxes, meaning everyone pays the same percentage regardless of income (up to certain limits)
• Are matched by employers, who pay an additional 7.65% on your behalf
• Fund specific programs: Social Security retirement and disability benefits, and Medicare health insurance
• Have a wage base limit for Social Security ($160,200 in 2023), but no limit for Medicare (plus an additional 0.9% for high earners)

Income taxes:

• Include federal, state, and local income taxes
• Are progressive taxes with rates that increase as income rises
• Are paid only by the employee, not matched by employers
• Fund general government operations and programs
• Can be reduced through deductions, credits, and various tax planning strategies

Understanding the difference helps explain why even if you qualify for income tax deductions or credits that eliminate your federal income tax liability, you'll still see FICA taxes withheld from your paycheck.