This guide will help you understand how calculating federal taxes works, but at the same time, our free calculator will help you estimate taxes for the current filing year.
Your total income:
$0
While we are on the subject of taxes, to be able to calculate federal tax withholdings, make sure you have your Form W–4 close by to follow the guidelines below and fill in the necessary information accordingly. Form W–4 will help you have a better insight into your filing status, dependents, multiple jobs (if you have them), or any other necessary information.
Levied by the IRS, federal income taxes are taxes all individuals, businesses, and legal entities have to pay based on their annual earnings (including salaries, wages, tips, etc.) Federal income tax rates range from 10% to 37% and depend on the taxpayer’s filing status and annual income.
The government uses the money collected from taxes to fund the economy of each state. In other words, tax revenue is used for education, health, transportation, infrastructure, etc.
Employees must be aware of federal income taxes withheld from their paychecks — such taxes are withheld by the employer from each paycheck.
The amount of those deductions largely depends on:
Form W–4 is the IRS document where you will provide information such as your:
Each time you start a new job or go through any changes that would affect the Form W–4 information — such as, for instance, changing your address — it’s your responsibility to adjust your Form W–4 accordingly.
Bear in mind that by filling out your Form W–4 accurately, you can avoid overpaying or even owing money to the IRS during tax season.
Employees may see two types of federal taxes on their paychecks:
Federal withholding mainly depends on your income and filing status — i.e. the amount you earn and the information you provide on Form W–4.
To calculate your income tax withholding, look at the chart below and determine your tax brackets first. Tax brackets indicate the tax rate you must pay on each part of your income.
Federal withholding tax brackets 2023
Tax rate | Single filers | Married filing separately | Married filing joint returns | Heads of households |
---|---|---|---|---|
10% | $0 to $11,000 | $0 to $11,000 | $0 to $22,000 | $0 to $15,700 |
12% | Over $11,000 to $44,725 | Over $11,000 to $44,725 | Over $22,000 to $89,450 | Over $15,700 to $59,850 |
22% | Over $44,725 to $95,375 | Over $44,725 to $95,357 | Over $89,450 to $190,750 | Over $59,850 to $95,350 |
24% | Over $95,375 to $182,100 | Over $95,375 to $182,100 | Over $190,750 to $364,200 | Over $95,350 to $182,100 |
32% | Over $182,100 to $231,250 | Over $182,100 to $231,250 | Over $364,200 to $462,500 | Over $182,100 to $231,250 |
35% | Over $231,250 to $578,125 | Over $231,250 to $346,875 | Over $462,500 to $693,750 | Over $231,250 to $578,100 |
37% | Over $578,125 | Over $346,875 | Over $693,750 | Over $578,100 |
So, for instance, a single taxpayer who earned $40,000 in 2022 will pay 10% of the first $11,000 of that income, and the next (and last) portion will be taxed at 12%. This tax system is called the progressive tax system, which means that the more you earn, the higher the tax rate you will have to pay.
Clockify Pro Tip
Don’t forget to mark your hours as billable. For that purpose, you may use a calculator below:
Apart from income tax withholding, FICA taxes are also deducted from each paycheck. By paying FICA taxes, you contribute to your Social Security and Medicare funds which you will be allowed to use after you retire.
The following are withholding rates regarding both:
Self-employed individuals pay the combined employee and employer amount — 12.4% Social Security tax (on up to $160,200) and 2.9% Medicare tax (on the entire net earnings). Moreover, self-employed individuals whose earnings exceed $200,000 pay an additional 0.9% in Medicare taxes.
The above-mentioned taxes are fixed amounts, and you cannot avoid paying them. Luckily, your taxable income is subject to deductions — amounts that may significantly lower your taxable income. This means that you don’t pay taxes on such items.
Taxpayers may choose between 2 types of deductions:
Don’t forget to add deductions in the calculator above — and bear in mind that you can only choose to claim one type of deduction.
According to the IRS, as of the tax year 2023, the standard deduction ranges are the following:
People usually choose the standard deduction. However, if you decide to itemize deductions, you must:
Still, there are some circumstances when certain individuals or organizations are freed from paying federal income taxes, and they are considered tax-exempt.
The following are tax-exempt individuals or organizations:
The following is a breakdown of federal taxes that apply across the US and concern employees and employers.
Employees are responsible for paying:
On the other side, employers are required to pay:
Finally, both employers and employees are required to pay:
We hope you find this federal paycheck calculator and accompanying explanations helpful. We advise you to pay attention to the information we’ve highlighted and the links we’ve provided, to make sure you calculate your federal withholdings correctly.
Please note that this calculator was created in Q2 2023, so any changes regarding tax brackets or related regulations that were included later than that may not be included in this guide.
Bear in mind that the results you get using our calculators may not be entirely accurate or complete and there might be deviations. We strongly advise you to consult with the appropriate institutions and/or certified representatives before acting on any legal matters.
Clockify is not responsible for any losses or risks incurred should this guide (or its calculators) be used without further guidance from legal or tax advisors.
]]>