Use this Take-Home-Pay Calculator to estimate how much you bring home after taxes and deductions from your salary. This calculator uses the tax brackets for 2014 and the tax rates based on the "American Taxpayer Relief Act of 2012" (fiscal cliff relief) signed by President Obama on January 2, 2013. It also gives out the estimated take home payment amount before the "American Taxpayer Relief Act of 2012" for comparison purpose.
In the United States, your gross income after tax and deductions is the "actual income" you will bring home. If you are an employee, your employer will withhold your tax and deductions from your paycheck. If you are self-employed, you are responsible for submitting your taxes either every quarter or every year, and paying for your own benefits.
Income taxes in the United States normally contain the following:
Federal Income Tax—this is a progressive income tax, which means the tax rate increases as your income grows. Currently, the federal income tax rate tops out at 39.6%.
State Income Tax—Seven states impose no income tax – Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. In the states that do impose an income tax, the lowest maximum rate is 3.07%, in Pennsylvania. The highest maximum rate is 10.3%, in California. Most states have a progressive income tax.
Local/City/Municipal Income Tax—some cities impose local tax – such as New York City, Philadelphia, etc. The state and local taxes are normally deductible for federal income tax.
Payroll Tax—this refers to Social Security tax and Medicare tax. The Social Security tax rate is 12.4% up to an annual maximum ($117,000 for 2014). Based on the "American Taxpayer Relief Act of 2012", the Medicare tax rate is 2.9% up to $200,000 for singles and $250,000 if married and filed jointly. After that, the Medicare tax rate is 3.8% with no up limit. If you are self-employed, you are responsible for your full payroll taxes. If you are an employee, your payroll taxes are shared by you and your employer. Your Social Security tax rate is 6.2% (4.2% for 2011 and 2012) and your Medicare tax rate is 1.45% if your income is below $200,000 (single) or $250,000 (married and filed jointly). If your income is higher, your Medicare tax rate is 2.35% for the higher portion. Your employer will pay a 6.2% of Social Security tax up to the annual maximum and 1.45% of Medicare tax with no up limit for you.
Unemployment Tax—if you are an employee, your employer will pay your unemployment taxes with no deduction from your paycheck. If you are self-employed, you do not need to pay unemployment taxes. Accordingly, you are not qualified for unemployment benefits upon the termination of your self-employment status.
In addition to taxes, there may be deductions from your paycheck for various reasons – most commonly, Employer-sponsored retirement savings and the shared cost of benefits. Normally, employer-sponsored retirement savings refers to 401K plan. Many employers provide 401K plans and "match" your savings. Some employers provide pension benefits. Pension benefits should be fully covered by the employer with no deduction from your paycheck. The shared cost of benefits refers to the partial benefit cost that many employers require employees to share, such as medical insurance, dental insurance, life insurance, and disability insurance. Medical spending plans and 529 college savings plans are other common deductions. Self-employed people are responsible for paying all benefit costs themselves. Most of these benefit costs are tax-deductible.
The American Taxpayer Relief Act of 2012 was passed by the Congress on January 1, 2013, and was signed into law by President Barack Obama on Jan. 2. This Act is a partial resolution to the United States fiscal cliff. The following is a list of major tax rate changes compared with previous years:
The top marginal tax rate increased to 39.6% from 35% for high income individuals and families. The following is the tax brackets for 2014.
|Single||Joint||Head of Household||Tax Rate|
|$0 to $9,075||$0 to $18,150||$0 to $12,950||10%|
|$9,075 to $36,900||$18,150 to $73,800||$12,950 to $49,400||15%|
|$36,900 to $89,350||$73,800 to $148,850||$49,400 to $127,550||25%|
|$89,350 to $186,350||$148,850 to $226,850||$127,550 to $206,600||28%|
|$186,350 to $405,100||$226,850 to $405,100||$206,600 to $405,100||33%|
|$405,100 to $406,750||$405,100 to $457,600||$405,100 to $432,200||35%|
The two-year old cut to payroll taxes expires, which means the social security tax will return to 6.2% from 4.2% for employee and to 12.4% from 10.4% for self-employed up to the annual maximum ($113,700 for 2013, $117,000 for 2014). Also, those make more than $200,000 for singles and $250,000 for married and filed jointly, will need to pay an additional 0.9% Medicare tax for the portion that is higher than $200,000 (single) or $250,000 (married and filed jointly).
For individuals makes more than $250,000 and couples makes more than $300,000, the personal exemption was eliminated.
Capital Gain Tax
The top marginal tax rate on capital gains is increased to 20% is for the $400,000/$450,000 upper income bracket. It will remain 15% for those makes less than that.
The estate tax is increased to 40% of the value above $5,250,000. The corresponding rate is 35% of the value over $5,120,000.
* The assessment of this Take-Home-Pay Calculator is only an estimate. The actual result will be slightly different.