Authoritative Data Source and Methodology
Primary Source: IRS Publication 15‑T — Federal Income Tax Withholding Methods (2024). IRS, January 2024. Link: https://www.irs.gov/pub/irs-pdf/p15t.pdf
- Social Security wage base (2024): $168,600 — SSA Contribution & Benefit Base
- Medicare Additional Tax threshold: $200,000 — IRS Q&A
- Standard deduction (2024): $14,600 (Single), $29,200 (Married filing jointly), $21,900 (Head of Household) — IRS
All calculations are strictly based on the formulas and data provided by this source.
The Formula Explained
Let the pay period count be P, with gross wages W_g per period, and:
401(k) per period: C_{401k} = W_g \times r_{401k}
Section 125 pre-tax per period: C_{125}
Annual adjustments: other income O, deductions D_{4b}, standard deduction D_{std}, dependent credits C_{dep}, extra withholding per period E
Federal taxable wages per period: W_{FIT} = W_g - C_{401k} - C_{125}
FICA taxable wages per period: W_{FICA} = W_g - C_{125}
Annualized FIT income: I_{ann} = \max\big(0, \; W_{FIT}\cdot P + O - D_{std} - D_{4b}\big)
Annual tax via brackets: T_{ann} = \mathrm{TaxBrackets}(I_{ann}, \mathrm{status})
Per-period FIT: FIT = \max\left(0,\; \dfrac{T_{ann} - C_{dep}}{P}\right) + E
Social Security: SS = \min\big(B_{SS}^{rem}, \; W_{FICA}\big) \times 0.062
Medicare: MED = W_{FICA}\times 0.0145 \;+\; \max\left(0,\; \dfrac{W_{FICA}\cdot P - 200000}{P}\right)\times 0.009
Net pay: Net = W_g - C_{401k} - C_{125} - FIT - SS - MED - \mathrm{PostTax}
Glossary of Variables
- Gross pay per period (W_g): Earnings before any taxes or deductions for the selected pay frequency.
- Pay frequency (P): 52 weekly, 26 biweekly, 24 semi-monthly, 12 monthly.
- Filing status: Single, Married filing jointly, Head of Household — determines tax brackets and standard deduction.
- 401(k)/403(b) rate (r_401k): Percentage of gross that reduces federal taxable wages only.
- Section 125 pre-tax (C_125): Amount that reduces both FIT and FICA wages (e.g., FSA/HSA, medical).
- Other income (O): Annual additional income from W‑4 Step 4(a) to be considered for withholding.
- Deductions (D_4b): Annual deductions beyond the standard deduction (W‑4 Step 4(b)).
- Standard deduction (D_std): IRS-set annual amount per status used in withholding calculations.
- Dependents credit (C_dep): Annual amount from W‑4 Step 3 that reduces computed tax.
- Extra withholding (E): Additional per-period amount from W‑4 Step 4(c).
- Social Security wage base (B_SS): Annual cap on wages subject to Social Security tax ($168,600 in 2024).
- FICA wages (W_FICA): Wages subject to Social Security and Medicare after Section 125 reductions.
How It Works: A Step‑by‑Step Example
Come Funziona: Un Esempio Passo‑Passo
- Inputs: Biweekly pay; gross = $3,000; Single; 401(k) = 5%; Section 125 = $50; Step 3 credits = $0; no other income/deductions; no extra withholding.
- Pre‑tax: 401(k) = $150; Section 125 = $50. FIT base = 3000 − 150 − 50 = $2,800. FICA base = 3000 − 50 = $2,950.
- Annualize FIT income: 2,800 × 26 = $72,800; subtract standard deduction $14,600 → $58,200.
- Apply 2024 Single brackets to $58,200 → compute annual tax; divide by 26 → FIT per period.
- FICA: SS = 2,950 × 6.2% (until you reach $168,600 annually); Medicare = 2,950 × 1.45% (no cap).
- Net: Gross − pre‑tax − FIT − SS − Medicare = take‑home pay.
Frequently Asked Questions (FAQ)
Is my employer’s payroll going to match these results exactly?
Not always. Employers may have additional deductions, rounding rules, benefits, garnishments, or YTD thresholds that alter withholding. This tool provides high‑quality estimates based on IRS methods.
Can I include state and local taxes?
This calculator focuses on US Federal taxes only. For a complete estimate, you’ll need to add state, local, and other withholdings separately.
How do I use the dependents credit?
Enter the annual total from W‑4 Step 3. The IRS suggests $2,000 per qualifying child under 17 and $500 for other dependents, subject to eligibility and income limits.
Does 401(k) reduce Social Security and Medicare?
No. Traditional 401(k)/403(b) reduces federal taxable wages but not Social Security or Medicare wages. Section 125 benefits reduce both.
When does Additional Medicare Tax start?
Employers withhold an extra 0.9% once an employee’s year‑to‑date Medicare wages exceed $200,000. This tool estimates it using your annualized wages and optional YTD input.
What if I have multiple jobs?
Total annual income affects your bracket. You can reflect this by entering “Other income (annual)” from W‑4 Step 4(a), which increases withholding.
Which year’s data is used?
IRS Publication 15‑T (2024) and FICA limits for 2024. Updates are applied as new guidance is released.