Paycheck Taxes – Federal Withholdings, State Withholdings, Social Security and More!
Paycheck stubs contain a lot of information. They show your pay as well as your federal withholdings and vacation balances.
All paycheck stubs show your gross pay — the total amount you earned before any taxes were withheld for the pay period. They also show your net pay — the amount of your check after all withholdings.
Why are there so many different federal and state tax withholdings and why are they sometimes different from paycheck to paycheck? Here’s a breakdown of the different paycheck taxes and why they sometimes change:
Federal Tax Withholding
(Fed Tax, FT, or FWT)
Your employer will use information you provided on your new Form W-4 as well as the amount of your taxable income and how frequently you are paid in order to determine how much federal income tax withholding (FITW) to withhold from each paycheck.
If you earn more than usual during a pay period (such as work overtime or receive a bonus), the FITW will increase. If you earn less (such as work fewer hours or increase contributions to your 401k), the FITW will decrease.
Your employer sends the federal income tax withholding to the IRS on your behalf. Your goal is to have at least enough FITW during the year to cover your expected federal income tax liability.
The total FITW for the year will be reported on your Form W-2 in box 2. If you’re not withholding enough federal tax, it’s time to adjust your withholding using Form W-4.
Federal income tax might be abbreviated as Fed Tax, FT, or FWT. Your federal withholding is the amount that you’ve already paid the federal government. So, when you file your return, you’ll get a credit for this amount to apply to any tax you’ll owe the federal government. Your federal income tax withholding from your pay depends on:
- The filing status shown on your W-4 form
- The number of dependents or allowances specified, and
- Other income and adjustments on the Form W-4 you filed with your employer
Note that allowances won’t be used to calculate paycheck withholding on Form W-4 starting in 2020.
How to Calculate Federal Income Tax Withholdings
To determine the correct federal tax withheld from your pay, you will need to complete your W-4. Your employer withholds from your paycheck based on the information you fill in on your Form W-4, like:
- Your filing status (Ex: single or married filing jointly),
- The number of dependents or allowances indicated.
Other income and adjustments You can increase your refund by changing your W-4 to show:
- A higher amount of other income,
- Lower deductions, or
- More extra withholding.
File your W-4 with your employer, so your employer can withhold the correct amount of tax.
(Use our W-4 withholding calculator for extra guidance.)
Local and State Tax Withholding
(St Tax, ST, or SWT)
State Income Tax Withholding
If your state has an income tax, you will probably have state income taxes withheld from your paycheck. Your employer will use information provided on the state version of Form W-4 and your income to determine how much to withhold.
If you owe taxes to more than one state (for instance, if you work in a different state from your resident state) you may want to request that your employer withhold taxes for the other state, withhold additional taxes from your work state, or pay estimated payments to the other state to make up the difference.
While you will likely have state tax withholdings on your paycheck, it depends on where you live. In fact, based on your location, you might:
- Not have state withholding
- Have state withholding for more than one state — the state you live in and the state(s) you work in
- Have local withholding
Local Income Tax Withholding
If your city or local community has an income tax, your employer may withhold local taxes. Rates and rules vary depending on location.
Knowing if your employer withholds local taxes can help you plan ahead and avoid surprises when you file your taxes.
Local income tax might be withheld on wages you earn inside city, county, and school district boundaries. If you live or work in an area that levies a tax, your wages will be taxed by that jurisdiction.
Medicare and Social Security Withholdings
(Social Security: FICA tax, SS, SSWT, or OASDI | Medicare tax: MWT or Med)
Usually, you must have Medicare and Social Security withholdings on each paycheck. This is true even if you have nothing withheld for federal, state, and local income taxes.
If you earn at least a specified amount for at least 40 quarters, you can get Social Security benefits when you retire. Each employer withholds 6.2% of your gross income for Social Security up to income of $132,900 for 2019. And $137,700 for 2020.Your employer must pay 6.2% for you that doesn’t come out of your pay.
Medicare taxes, unlike Social Security tax, go to pay for expenditures for current Medicare beneficiaries.
Your employer withholds 1.45% of your gross income from your paycheck. Your employer pays an additional 1.45%, the employer part of the Medicare tax. There are no income limits for Medicare tax, so all covered wages are subject to Medicare tax.
Employers must also withhold an additional 0.9% (2.35% total) of Medicare tax on earned income of more than $200,000 in a tax year.
Your paycheck stub might also show year-to-date totals. This is good to know if you want to estimate if you’ll have a refund or balance due at the end of the year.
Save the last paycheck stub to compare with your W-2. The amounts on the last stub and the W-2 amounts usually should match. However, your employer might have added other amounts for additional benefits offered. These could be taxable income for you. Contact your payroll department if there are any differences.
Your paycheck stub might show deductions for health or life insurance. If it does, your stub might show if the premiums were deducted before tax or after tax. Before-tax deductions will reduce the income tax withholding to federal, state, and local governments.
Some employers offer their employees the chance to contribute to retirement plans, like 401(k)s. Others offer childcare or adoption assistance. If you took advantage of any of these plans, your stub will usually show deductions for them.
If you have questions about other amounts or tax items on your paycheck stub, check with your manager or your human resources department.
More Information on Paycheck Taxes
Check your paystub and use a W-4 Calculator to find out if you need to make any changes to your federal income tax withholding this year. If you’re expecting a big refund this year, you may want to adjust your withholding to have more take-home pay each pay period.
Learn more about paycheck W-4 withholding
Learn what to do if you don't know your dependent's SSN and are receiving an e-file error with help from the tax experts at H&R Block.
How can you apply for a business meal or entertainment deduction? Learn more about these options and get tax answers at H&R Block.
Do you know which business travel expenses are eligible for deductions? Learn more about how to deduct travel expenses and get tax answers at H&R Bloc
Can you claim the difference between your employer's reimbursement and the IRS standard mileage rate? Learn more from the tax experts at H&R Block.