If you get a new job, knowing your salary is nice, but it's not necessarily reflective of how much money you're actually going to bring home. If you know your salary, exemptions, filing status, and other withholdings, you can figure out how much you'll bring home per month.
First step: figure out your after-tax income
Income taxes are much easier to figure out on an annual basis, so let's start there. The amount of federal income taxes withheld from your paycheck is based on three factors:
- Your salary (which determines your tax bracket).
- How you fill out IRS Form W-4 (which includes income from other means than your primary job, as well as any projected deductions).
- Your filing status (single, married filing jointly, etc.).
First, add your salary and any other income you expect to receive this year, such as rental income, dividends, interest, or self-employment income. Then subtract your applicable standard deduction amount (as indicated in the table below) or your itemized deduction amount -- whichever is greater. Also remember to subtract any pre-tax contributions to retirement accounts you'll be making or any health insurance premiums your employer pays.
| FILING STATUS | STANDARD DEDUCTION |
|---|---|
| Single | $12,950 |
| Married filing jointly or qualifying widow(er) | $25,900 |
| Married filing separately | $12,950 |
| Head of household | $19,400 |
This number is an estimate of your taxable income. From here, you can use the following tax table to figure out approximately how much federal income tax will be withheld from your paycheck. (Note: We only included single and married filing jointly due to space constraints. You can find full tax tables here.)
| IF YOU ARE A SINGLE FILER AND YOUR TAXABLE INCOME IS... | YOUR FEDERAL INCOME TAX WILL BE... | IF YOU ARE A MARRIED JOINT FILER AND YOUR INCOME IS... | YOUR FEDERAL INCOME TAX WILL BE… |
|---|---|---|---|
| $0 to $10,725 | 10% of your taxable income | $0 to $20,550 | 10% of your taxable income |
| $10,276 to $41,775 | $1,027.50 + 12% of the income over $10,275 | $20,551 to $83,550 | $2,055 + 12% of the amount over $20,550 |
| $41,776 to $89,075 | $4,807.50 + 22% of the income over $41,775 | $83,551 to $178,150 | $9,615 + 22% of the amount over $83,550 |
| $89,076 to $170,050 | $15,213.50 + 24% of the income over $89,075 | $178,151 to $340,100 | $30,427 + 24% of the amount over $178,150 |
| $170,051 to $215,950 | $34,647.50 + 32% of the income over $170,050 | $340,101 to $431,900 | $69,295 + 32% of the amount over $340,100 |
| $215,951 to $539,900 | $49,335.50 + 35% of the income over $215,950 | $431,901 to $647,850 | $98,671 + 35% of the amount over $431,900 |
| $539,901 or more | $162,718 + 37% of the income over $539,900 | $647,851 or more | $174,253.50 + 37% of the amount over $647,850 |
Take the amount of your tax and divide by 12 to determine how much should be withheld per month. Also calculate your state taxes and any local taxes you may be subject to. Each state has a different tax rate (or none at all). Here's a link from TaxFoundation.org to help you find yours.
We're not done with taxes quite yet. Social Security will take 6.2% of up to $160,200 of your salary, and Medicare will take another 1.45% and is applied to your entire salary, no matter how much it is.
From here, you'll need to tally up the rest of your deductions, including (but not limited to):
- Your retirement contributions (usually a percentage of your monthly salary).
- Benefits (health/dental/vision insurance, life insurance, etc.).
- Union dues.
- Any wage garnishments.
Remember to figure all of these amounts on a monthly basis. Many health insurance premiums are quoted on a monthly basis, but it's worth double-checking all of these amounts and converting them to monthly figures if necessary. For example, if you're a teacher and pay union dues of $20 from each semi-monthly paycheck, be sure to use $40 when adding up your deductions.
The final step is to take your salary, divide it by 12, and then subtract all of your taxes and payroll deductions. The result of this calculation will be your monthly take-home pay.
If this calculation seems rather complicated, there are payroll calculators online, such as this this one that do the math for you. At least you now know where the number on your paycheck is coming from.
An example
To illustrate this, let's consider an example, albeit an oversimplified one. Let's say that you just got a new job with a starting salary of $100,000. For this calculation, we'll assume you are single and take the standard deduction. You have agreed to contribute 5% of your salary to your new employer's 401(k) on a pre-tax basis, and your employer pays $5,000 worth of medical premiums on your behalf. So your taxable income is:
| SALARY | $100,000 |
|---|---|
| Pre-tax retirement savings (5% of salary) | -$5,000 |
| Health insurance premiums | -$5,000 |
| Standard deduction | -$12,950 |
| Taxable income | $77,050 |
According to the tax table mentioned earlier, your federal income tax is expected to be $12,568 for the year.
For simplicity's sake, let's say that you live in a state with no state income tax, so your taxes can be calculated with:
| FEDERAL INCOME TAX | $12,568 |
|---|---|
| Social Security tax | $4,777.10 |
| Medicare tax | $1,117.23 |
| Total taxes | $18,462.33 |
Dividing by 12 gives us a monthly tax estimate of $1,538.53.
Finally, taking your taxes and other items into account gives us your monthly take-home pay:
| MONTHLY SALARY | $8,333.33 |
|---|---|
| Payroll deductions | -$833.33 |
| Taxes | -$1,538.53 |
| Take home pay (monthly) | $5,961.47 |
