Important note on the salary paycheck calculator: The calculator on this page is provided through The Application and HBCU 20x20 and is designed to provide general guidance and estimates. It should not be relied upon to calculate exact taxes, payroll or other financial data. These calculators are not intended to provide tax or legal advice and do not represent any of The Applications and HBCU 20x20 services or solutions. You should refer to a professional advisor or accountant regarding any specific requirements or concerns.
How to calculate net income
- Determine taxable income by deducting any pre-tax contributions to benefits
- Withhold all applicable taxes (federal, state and local)
- Deduct any post-tax contributions to benefits
- Garnish wages, if necessary
- The result is net income
How to calculate annual income
To calculate an annual salary, multiply the gross pay (before tax deductions) by the number of pay periods per year. For example, if an employee earns $1,500 per week, the individual’s annual income would be 1,500 x 52 = $78,000.
How to calculate taxes taken out of a paycheck
- Refer to employee withholding certificates and current tax brackets to calculate federal income tax
- Calculate Federal Insurance Contribution Act (FICA) taxes using the latest rates for Medicare and Social Security
- Determine if state income tax and other state and local taxes and withholdings apply
- Divide the sum of all applicable taxes by the employee’s gross pay
- The result is the percentage of taxes deducted from a paycheck
Calculations, however, are just one piece of the larger paycheck picture.
What is a paycheck?
A paycheck is how businesses compensate employees for their work. The most common delivery schedules are bi-weekly and semi-monthly, though this varies based on employer preferences and applicable state laws and regulations. Business-specific requirements, such as collective bargaining agreements covering union employees, may also dictate paycheck frequency.
Types of paychecks
Traditionally, employees received printed checks in person or by mail, but more often today, the money is electronically deposited into a bank account.
How to read a paycheck
Unlike withholding certificates and other employment documents, paychecks are pretty easy to decipher. Reading them is simply a matter of making sure the payment information is correct.
Information found on a paycheck:
- Check number
- Employer’s name and address
- Check date
- Payment amount
- Employer’s bank account and routing numbers
- Check memo (optional)
Information found on a pay stub
Most states require employees to receive pay stubs. They’re typically provided with paychecks and list details such as:
- Pay period start and end date
- Hours worked
- Gross pay
- Net or take home pay
- Federal and state income taxes
- Local taxes
- Medicare and Social Security taxes
- Deductions for benefits
- Wage garnishments
- Year-to-date totals
- Paid time off (PTO) balances
Actual pay stubs vary based on individual circumstances and the state. Some have specific requirements about the information that has to be included on the pay statement and when it must be delivered to employees.
Pre-Tax vs. After-Tax Income
In the United States, income is taxed at both the federal and state levels. Federal
income tax rates range from 10% to 37%, while state income tax rates vary widely, with
some states taxing at a flat rate and others following a progressive tax system. As a
result, the amount of taxes that someone owes can have a significant impact on their
overall financial picture.
Pre-tax income is the total amount of money earned in a given year, before any taxes are
deducted. In contrast, after-tax income is the total amount of money earned in a given
year, after all federal, state, and local taxes have been deducted. For many people,
their after-tax income is substantially lower than their pre-tax income.
- Single: Applies to unmarried, legally separated, or divorced people.
- Married filing jointly: Wedded pair filling out a tax return together.
- Married filing separately: People who are married but choose to file separate tax returns
instead of a joint return with their spouse.
- Head of household: Applies to unmarried individuals who pay more than half the expenses for
household and support dependents.
The options "Single," "Married Filing Jointly," and "Head of Household" will be the most
frequently selected ones. A single person may also choose a different filing status. For
instance, if the prerequisites are met, a "Single" person can also file as a "Head of
Household". With these options available, a taxpayer can weigh their options and decide on the
filing status that will result in the least amount of taxation.
- Weekly: Pay every week, usually on a set day.
- Bi-Weekly: Pay every other week, usually on a set day.
- Monthly: Pay once per month on a specific day.
- Semi-Monthly: Pay twice a month, usually on the 15th and last days of the month.
The frequency of your paychecks will depend on the method by which you're paid. Some people get
monthly pay, while others receive their wages twice a month or once every two weeks, depending
on the employer’s preference as well as the state laws that apply. I should also be noted that
the size of your paychecks will be determined by the frequency with which you receive them.
Assuming the same salary, the more paychecks you receive each year, the smaller each paycheck
Withholdings and deductions
Employees in the United States have several withholdings and deductions taken out of their
paycheck. Pretax deductions are withheld from an employee's paycheck before taxes are
calculated. This includes items such as contributions to a 401(k) retirement plan or a flexible
Deductions that are not withheld pre tax are taken out after taxes are calculated. This includes
items such as health insurance premiums or union dues.
Itemized deductions are expenses that can be deducted from an individual's taxable income.
Common itemized deductions include mortgage interest, state and local taxes, and charitable
Employees should check with their employer to see what withholdings and deductions are taken out
of their paycheck.
Federal Income Tax
One of the most important features of the United States tax system is the federal income tax.
This tax is levied on all individuals and businesses that earn income from sources within the
United States. The federal income tax is used to fund a variety of government programs and
services, including national defense, Social Security, and Medicare.
The amount of tax that an individual or business owes is based on their income level. The
federal income tax rate for individuals ranges from 10 percent to 37 percent, while the
corporate tax rate is 21 percent. In order to ensure that taxpayers comply with the law, the IRS
conducts audits of individual and business taxpayers. Audits can be conducted either through
mail or in person. If an audit reveals that a taxpayer has underpaid their taxes, they may be
required to pay interest and penalties in addition to the amount of taxes owed.
Social Security Tax
The Social Security Tax is a payroll tax that is imposed on both the employer and the employee.
The amount of the tax is based on the wages paid to the employee. The Social Security Tax is
progressive, which means that it takes a larger percentage of income from high earners than it
does from low earners. It is used to fund the Social Security program which provides benefits
for retirees, the disabled, and survivors of deceased workers.
Individuals who are employed and pay Medicare taxes have a portion of their salary withheld from
each paycheck. The amount withheld is based on the employee's gross salary, and the current
Medicare tax rate is 1.45%. Individuals who are self-employed must pay the Medicare tax
themselves, and the tax rate is 2.9%. The Medicare tax is used to fund the Medicare program,
which provides health insurance for seniors and certain disabled individuals. People who have
Medicare coverage do not need to purchase additional health insurance. The Medicare tax helps to
ensure that all eligible individuals have access to quality health care.
In the United States, overtime pay is governed by both federal and state laws. Under the Fair
Labor Standards Act (FLSA), non-exempt employees must be paid 1.5 times their regular rate of
pay for any hours worked over 40 in a workweek. However, some states have their own overtime
laws that may provide additional protections for workers. For example, California requires
overtime pay for any hours worked over 8 in a day or 40 in a workweek, while New York has a
daily overtime requirement for certain industries such as construction and manufacturing.
Additionally, there are certain exemptions to the overtime pay requirement under the FLSA.
Executive, administrative, and professional employees may be exempt if they meet certain
criteria regarding their job duties and salary level. Other exemptions include outside
salespeople, certain computer professionals, and farmworkers.