You were offered a job with a big salary. But when you received your pay check, it wasn't as big as you have expected. What went wrong? Did the company decide to lower down your salary or did they trick on you? It's not really the company's fault. Besides, the company does not need to explain to you the different taxes that have to be deducted from your salary. It is your homework to know what are being deducted from your salary. You should know that the tax is among the biggest eaters of your salary.
Calculating your salary after taxes will save you from expecting too much and help you decide whether moving to another state is financially wise or not. Fortunately, deducting taxes from your salary is as simple as getting the difference. The only challenging part is to know what are the taxes that should be deducted and how much.
Different Locations, Different Taxes
You are lucky if you live in a state that does not require an income tax. If you are so unlucky, your salary will be deducted with the federal tax, state tax, and even the payroll tax. Every month, these taxes continue to lower your net income.
Federal tax depends upon your income. But generally, the more you earn, the more percentage of your earning is deducted for this tax. State tax, on the other hand, is the tax for your state. The rules and percentage vary from state to state. Most states, however, deduct tax depending on how much your income is. Other states like Illinois are getting the same percentage no matter how much your income is. There are also states like Washington, Texas, Florida, and Alaska that do not have income tax.
Computing the Salary After Taxes
Besides your location, the tax also depends upon other things like your marital status. Here are two ways you can do to calculate your salary after taxes:
- Calculate it yourself. As mentioned above, calculating your salary is as simple as getting the difference. Simply subtract all the taxes that have to be deducted from your income and the total will be your net salary. Usually, taxes are paid through percentage. So, if the state tax is 3%, you need first to get the 3% of your salary and deduct that from your gross salary. Don't forget to deduct other necessary taxes like the federal tax and salary tax. If you find this difficult and confusing, better seek help from the human resources department. They are the ones who are computing your net salary. They can explain to you the rules and laws governing your salary deductions.
- Online calculator. Some websites are offering free online net salary calculators. Try the Paycheck City, MG CPA, and Online Conversion. Calculate your salary using their program. The more details the program needs, the better. That is why the Paycheck City is considered better than the other two. The former asks things like filing status, frequency of pay, state, and other more specific data. Simply click on the "Calculate" button and your estimated net salary will be shown.
Some people find it so inconvenient to compute their after-taxes salary. If you feel the same way, just remember that it is your salary. Any wrong calculation will be for your own benefit or loss. It's always better to know how your company calculates your salary so you can check if they are giving you the right net income.