Understanding how your paycheck is calculated can help you better manage your finances and plan for the future. This paycheck calculator uses standard formulas to estimate your take-home pay based on the information you provide.
Key Formulas Used
For Hourly Employees:
Gross Pay = Hourly Wage × Hours Worked × Pay Period Multiplier
For Salaried Employees:
Gross Pay = Annual Salary ÷ Number of Pay Periods
Tax Calculations:
Federal Tax = (Gross Pay - Pre-tax Deductions) × Federal Tax Rate
State Tax = (Gross Pay - Pre-tax Deductions) × State Tax Rate
FICA Tax = (Gross Pay - Pre-tax Deductions) × 7.65% (6.2% Social Security + 1.45% Medicare)
Net Pay Formula:
Net Pay = Gross Pay - (Federal Tax + State Tax + FICA Tax + Post-tax Deductions)
Example Calculation
Let's say you earn $25 per hour, work 40 hours per week, and get paid bi-weekly:
- Gross Pay: $25 × 80 hours = $2,000 per pay period
- Federal Tax (12%): $2,000 × 0.12 = $240
- State Tax (5%): $2,000 × 0.05 = $100
- FICA Tax (7.65%): $2,000 × 0.0765 = $153
- Net Pay: $2,000 - $240 - $100 - $153 = $1,507