How to calculate withholding taxes
Most of us notice several deductions on our paychecks. If you’re a full-time employee (as opposed to a contract worker), you’re likely to see the following deductions:
- Federal income tax withheld
- State income tax withheld (ranging from 1% to 13.3% in 43 states)
- Medicare (1.45% of the total from your paycheck, and 1.45% paid by your employer)
- Social Security (6.2% from your paycheck and another 6.2% from your employer, on the first $176,100 of income)
As a general rule, it’s best to review your previous tax year filing and determine your effective tax rate, or the percentage of your income that you paid in taxes. As long as you haven’t had any major life changes, such as a better-paying new job, new child, marriage, or divorce, you can apply the percentage to your anticipated earnings and divide it by the number of pay periods.