Understanding Gross Pay
Your gross pay is the total amount earned before any deductions. This includes your base salary or hourly wages, plus overtime, bonuses, and commissions.
For Salaried Employees
- Start with your annual salary
- Determine pay periods:
- Weekly (52 periods)
- Bi-weekly (26 periods)
- Semi-monthly (24 periods)
- Monthly (12 periods)
- Divide annual salary by number of pay periods
Example: For a $60,000 annual salary with bi-weekly pay:
Gross Pay = $60,000 รท 26 = $2,307.69
For Hourly Employees
- Multiply hourly rate by hours worked
- Calculate overtime (typically 1.5x regular rate for hours over 40/week)
- Include any additional income (bonuses, tips, holiday pay)
Mandatory Deductions
Federal Income Tax
Use the IRS Tax Withholding Estimator to determine withholding based on:
- Filing status
- Number of dependents
- Additional income
- Deductions
Social Security and Medicare (FICA)
- Social Security: 6.2% of wages up to annual limit
- Medicare: 1.45% of all wages
- Additional 0.9% Medicare Tax for high earners
State and Local Taxes
Rates vary by location. Check your state's department of revenue website for current rates.
Voluntary Deductions
Common voluntary deductions include:
- Health insurance premiums
- Retirement contributions (401(k), 403(b))
- Life insurance
- Disability insurance
- Flexible Spending Accounts (FSA)
- Health Savings Accounts (HSA)
Sample Calculation
Gross Pay (bi-weekly): $2,000.00
Federal Tax (12%): -$240.00
State Tax (5%): -$100.00
FICA (7.65%): -$153.00
Health Insurance: -$150.00
401(k) (5%): -$100.00
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Net Pay: $1,257.00
Additional Considerations
Remember that tax rates and contribution limits change annually. Always verify current rates and limits when calculating your paycheck.
Important Notes
- Bonuses and commissions are often taxed at a higher rate
- Pre-tax deductions reduce your taxable income
- Court-ordered garnishments will reduce net pay
- Monitor tax withholdings throughout the year
- Adjust W-4 if necessary
Online Resources
Several free paycheck calculators are available:
For more detailed guidance, consider consulting with a financial advisor or using these online calculators to verify your calculations.