How to Calculate Gross Salary to Net Take-Home
- 1). Determine your gross salary on a per-pay-period basis. If you are a full-time salaried professional paid biweekly, divide your total annual salary by 26. If you are paid on the 15th and 30th day of the month, divide your total salary by 24. If you are an hourly employee, multiply your regular hourly wage by the number of hours worked in a pay period.
- 2). Calculate your federal income tax deduction. This varies from employee to employee based on the total amount of allowances that you claim on IRS Form W-4 when you begin employment; the more allowances you claim, the less taxes are deducted from your paycheck.
Estimate your tax deduction per pay period by multiplying your pay period gross salary by the tax rate for your expected annual income: 10 percent for annual income from $0 to $8,500; 15 percent for income from $8,501 to $34,500; 25 percent for income from $34,500 to $83,600; 28 percent for income from $83,601 to $174,00; 33 percent for income from $174,401 to $379,150; and 35 percent for income exceeding $379,150. - 3). Determine the value of any voluntary pre-tax deductions. Certain deductions are exempt from taxation, including medical or dental insurance premiums, 401(k) or other tax-deferred retirement plan contributions and flexible savings account contributions. These items should be deducted from your per pay gross income before you calculate taxes.
- 4). Calculate your Social Security and Medicare tax deductions. Social Security contributions are 6.2 percent of your gross pay per period, and Medicare tax is 1.45 percent of your gross pay per period. These deductions may be labeled on your pay stub as FICA, SS, SSWT or OASDI.
- 5). Calculate any deductions for state or local taxes. If you live in a state that has an income tax, this tax will be deducted as a percentage of your gross pay per period. Determine your approximate state income tax rate by checking the website for your state's Department of Revenue. Although it varies by state, 5 percent to 8 percent generally is a reasonable rate when estimating your take-home pay. Some cities also impose a local city tax of 1 to 2 percent on your gross pay per period.
- 6). Determine the value of any voluntary deductions after taxes. This includes any other items that you elect to have deducted from your paycheck, such as charitable contributions, adoption assistance payments, parking and transportation costs or additional savings contributions to a taxable savings account.
- 7). Calculate your net take-home pay. Beginning with your gross pay per period, subtract all voluntary pre-tax deductions, state, federal and local tax estimates, Social Security and Medicare taxes and any voluntary after-tax deductions.
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