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How is net pay calculated in the US?

how is medicare tax calculated

I am curious about how the tax system works in the US. Let's say you earn $100K (gross) a year (to make it round). How much would you make monthly? Are taxes deducted on a monthly basis or do you have one big annual tax review? Do you have to calculate this yourself or is there some kind of agency that. show more I am curious about how the tax system works in the US. Let's say you earn $100K (gross) a year (to make it round).

How much would you make monthly?


Best Answer: My figures assume you are an unmarried salaried employee working for a company you don't own. (If you own your business you would handle taxes a little differently).

The U.S federal goverment. uses a grading/marginal tax scale. As you make more money, that additional money is taxed at a higher rate. For example:

On the first 8,350 you pay 10% tax

Between 8,351 and 33,950 you pay 15%

Between 33,941 and 82,250 you pay 25%

Between 82,251 and 171,550 you pay 28%

Between 171,551 and 372,950 you pay 33%

Over 372,950 you pay 35%

So, if you made 100,000 you pay as follows:

The first 8,351 you would pay 10% = 835

The next 25,599 (anything over 8,351, but less than 82,250) you would pay 15% = 3,840

The next 48,299 you would pay 25% = 12,074

The last 17,751 you would pay 28% = 4,970

So your total federal taxes would be

835+3840+12074+4970 = 21,720

21,720 is 21.7% of 100,000. This is called your effective tax rate.

On top of that in most states (Virginia, Arkansas, California, etc) you have to pay a state tax. The process can vary from state to state, with some following a similar procedure as the Federal Goverment. However, the state tax is usually much lower than the federal tax, adding on only an additinal 5% to 10% tax.

On top of that you have to pay specific taxes for some specific programs, such as Unemployment Tax, Medicare, etc. These also usually add on an additional 5 to 8%.

When it is all said and done, you can probably expect total taxes to be to be about 36% - 40% of your $100,000 salaray, depending on where you live within the U.S. So lets use 38%. On a monthly basis you would bring home about $5,166. However, most of the time, salaried employees either get paid every two weeks or two times per month.

These tax amounts are automatically deducted from your paycheck each pay period by your employer. They send it off to the appropriate agencies.

Then one time per year you have to file your income tax return, this basically matches up total amount of taxes you did pay versus the total amount taxes you should have paid based on your salary. If you paid too much tax over the year, you get a refund. If you paid to little, you have to pay the difference.


Suzanne · 6 years ago

Category: Insurance

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