Understanding the difference between your gross salary and your actual take-home pay is crucial for effective budgeting. Your net pay is what remains after several layers of mandatory and voluntary deductions are removed from your gross earnings.
The Main Components of Payroll Tax
When you look at your pay stub, you will typically see three main categories of tax withholding:
Federal Income Tax: Calculated based on your annual income brackets and filing status. This uses a progressive system where higher income portions are taxed at higher rates.
FICA Taxes: This consists of Social Security (6.2%) and Medicare (1.45%). For most employees, this is a flat 7.65% of your gross wages up to the Social Security wage base limit.
State and Local Taxes: Depending on where you live, your state may take an additional percentage of your income. Some states have a flat tax, while others use progressive brackets similar to the federal government.
Pre-Tax vs. Post-Tax Deductions
Pre-tax deductions are taken out of your gross pay before taxes are calculated. This is beneficial because it lowers your taxable income. Common examples include contributions to a 401(k), 403(b), or Health Savings Account (HSA), and health insurance premiums.
Post-tax deductions are taken out after your taxes have been calculated. These do not reduce your tax burden. Examples include ROTH 401(k) contributions, disability insurance, or specific life insurance premiums.
Example Calculation
If an individual earns $60,000 annually and is paid monthly ($5,000 gross):
Gross Monthly: $5,000
FICA (7.65%): $382.50
Federal Tax (est): ~$550 (varies by filing status)
State Tax (est 5%): $250
Net Pay: Approximately $3,817.50 before other personal deductions.
function calculatePaycheck() {
var grossInput = parseFloat(document.getElementById("grossPay").value);
var frequency = parseFloat(document.getElementById("payFrequency").value);
var status = document.getElementById("filingStatus").value;
var stateRate = parseFloat(document.getElementById("stateTax").value) / 100;
var preTax = parseFloat(document.getElementById("preTaxDed").value);
var postTax = parseFloat(document.getElementById("postTaxDed").value);
if (isNaN(grossInput) || grossInput <= 0) {
alert("Please enter a valid gross pay amount.");
return;
}
// Determine Annual Gross
var annualGross = (frequency === 1) ? grossInput : (grossInput * frequency);
var periodGross = (frequency === 1) ? (grossInput / 12) : grossInput; // Default to monthly if annual input
if(frequency === 1) {
// If user input annual, we recalculate period based on monthly for display or keep as annual
periodGross = annualGross / 12;
// Adjustment: if they selected 'Annual' frequency, results show monthly breakdown
}
// 1. Pre-tax deductions effect
var annualPreTax = preTax * (frequency === 1 ? 12 : frequency);
var taxableIncome = annualGross – annualPreTax;
// 2. Federal Income Tax Estimation (Simplified 2024 Brackets)
var standardDeduction = 14600;
if (status === "married") standardDeduction = 29200;
if (status === "hoh") standardDeduction = 21900;
var federalTaxable = taxableIncome – standardDeduction;
if (federalTaxable 0) fedTax += Math.min(federalTaxable, 11600) * 0.10;
if (federalTaxable > 11600) fedTax += Math.min(federalTaxable – 11600, 47150 – 11600) * 0.12;
if (federalTaxable > 47150) fedTax += Math.min(federalTaxable – 47150, 100525 – 47150) * 0.22;
if (federalTaxable > 100525) fedTax += (federalTaxable – 100525) * 0.24; // Simplified cap
} else {
// Married
if (federalTaxable > 0) fedTax += Math.min(federalTaxable, 23200) * 0.10;
if (federalTaxable > 23200) fedTax += Math.min(federalTaxable – 23200, 94300 – 23200) * 0.12;
if (federalTaxable > 94300) fedTax += Math.min(federalTaxable – 94300, 201050 – 94300) * 0.22;
if (federalTaxable > 201050) fedTax += (federalTaxable – 201050) * 0.24;
}
// 3. FICA (Social Security 6.2% up to $168,600 + Medicare 1.45%)
var ssTax = Math.min(annualGross, 168600) * 0.062;
var medTax = annualGross * 0.0145;
var totalFica = ssTax + medTax;
// 4. State Tax
var annualStateTax = taxableIncome * stateRate;
// 5. Convert to Period Values
var divisor = (frequency === 1) ? 12 : frequency;
var periodFedTax = fedTax / divisor;
var periodFica = totalFica / divisor;
var periodStateTax = annualStateTax / divisor;
var periodPostTax = postTax;
var netPay = periodGross – periodFedTax – periodFica – periodStateTax – preTax – periodPostTax;
// Display
document.getElementById("resGrossPeriod").innerText = "$" + periodGross.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resFedTax").innerText = "-$" + periodFedTax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resFica").innerText = "-$" + periodFica.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resStateTax").innerText = "-$" + periodStateTax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resPreTax").innerText = "-$" + preTax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resPostTax").innerText = "-$" + periodPostTax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resNetPay").innerText = "$" + netPay.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("paycheck-results").style.display = "block";
}