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How do I work out my net pay?
December 1, 2004 1:11 PM   Subscribe

I’m thinking about switching jobs, and I’m trying to figure out what my net pay would be, but I’m stumbling a bit… [MI]

(I’m remembering why I hated my accounting courses in college!)

I’m currently an hourly employee, and, as the number of hours per week I work fluctuates greatly, so does my net pay. I’m thinking about moving into a salaried position in another company, and I’m trying to figure out what my net pay would be there. There are some numbers I don’t know and can’t work with (costs related to HMO, dental, parking, etc.), but I’m looking to get a grasp on the amount per paycheck that I should be deducting for taxes.

Using 2004 rates as a assumption, this page tells me that my pay would fall into the 25% category for Federal taxes ($29,051 to $70,350). And this page tells me that my Mass taxes would be 5.3% (as I would be making more than $24,000 a year).

Is it as simple as taking yearly salary, diving by 26 (pay periods per year) and then subtracting 30.3%? Or am I missing something?
posted by NotMyselfRightNow to Work & Money (14 answers total)
 
Don't forget FICA.
posted by Juicylicious at 1:17 PM on December 1, 2004


Don't forget FICA for 12%.
-ajb
posted by madajb at 1:18 PM on December 1, 2004


Don't forget unemployment, social security,worker's comp, medicare/medicaid, etc. taxes.

Also, don't forget that anything you deduct before taxes (i.e. health insurance, 401k) is going to warp that. Plus, there's the number of deductions you can take.

And if you're closer to the bottom end of that scale, if you own a house or have children or other significant tax credits or deductions, you could end up dropping into a different tax bracket.

With all that being said, I've found that 35% is a safe figure for federal, add state on top of that and you should get a better number.
posted by SpecialK at 1:19 PM on December 1, 2004


Damn, that's what I get for scanning, 12%, that's for us contractors.

If you are going to be salary, you'd end up paying around 7.5% for FICA and Medicare.
posted by madajb at 1:20 PM on December 1, 2004


Here you go, I knew I had one of these around somewhere.
posted by madajb at 1:26 PM on December 1, 2004


SpecialK - Unfortunately, I'm a single, childless, apartment dweller. Oh well. ;-)

Juicylicious and madajb, thanks for that. I had it in my notes as a "solid" that I knew to deduct...

Madajb... on preview... damn I'm glad I'm not a contractor...
posted by NotMyselfRightNow at 1:27 PM on December 1, 2004


madajb - Thanks for that link. I was trying to find one online that I liked, and couldn't. But this is perfect! (And, cool, my math was right!)
posted by NotMyselfRightNow at 1:30 PM on December 1, 2004


damn I'm glad I'm not a contractor...


It's not as bad as it seems, the 15.4% that is. Because us "contractors" get to take biz expense deductions, which bring the dollar amount down quite a bit.
posted by Juicylicious at 1:33 PM on December 1, 2004


When estimating pay, I like to deduct %33 from the gross pay and be pleasantly 'surprised' when the net is actually more than that.
posted by soplerfo at 1:39 PM on December 1, 2004


Is it as simple as taking yearly salary, diving by 26 (pay periods per year) and then subtracting 30.3%? Or am I missing something?

You can do that for the difference, but not for the entire check, since tax rates are progressive. In other words, your 50,000th dollar is taxed at a greater rate than your first.

You probably knew this, but it's not clear from your description-- and it's not clear from anyone else's, either.
posted by trharlan at 2:24 PM on December 1, 2004


Actually he did and it is not correct that the 50,000th dollar is taxed at a greater rate. For 2004, the 25% bracket is $29,051 to $70,350, as the poster stated. So, you do bump up 'til you hit $70,351.
posted by Juicylicious at 2:40 PM on December 1, 2004


So, you do not bump up 'til you hit $70,351.

/correction
posted by Juicylicious at 3:03 PM on December 1, 2004


You are wrong. I stand by my statement in its entirety. I stated that the 50,000th dollar would be taxed at a greater rate than the first dollar.

It may be abundantly clear to everyone here that different dollars are taxed at different rates. However, this statement:

Using 2004 rates as a assumption, this page tells me that my pay would fall into the 25% category for Federal taxes ($29,051 to $70,350)

Is absolutely false. NotMyselfRightNow's marginal rate is 25%, but his average rate is substantially less.
posted by trharlan at 7:03 PM on December 1, 2004


Furthermore, using these pages(two of which are yours), I can tell you this to help you determine your future federal income tax liability:

1. Take your yearly salary, and subtract all pretax deductions such as health care and 401(k) contributions.
2. Subtract $4850 from your salary (assuming you take the standard deduction).
3. Subtract $3100 from your salary (the personal exemption)
4. The number that remains is your taxable income.
Now go to 5a, 5b, or 5c as appropriate,

5a. If this number is less than 7150, your liability will be 10% of your taxable income.
5b. If this number is between 7151 and 29050, your liability will be $715 plus 15% of the difference between your taxable income and $7150.
5c. If this number is between 29051 and 70350, your liability will be $4,000 plus 25% of the difference between your taxable income and $29050.

Social Security and Medicare will set you back 7.65% on all income under $87,000. This calculation is entirely independent of the federal income tax.

To figure out your Mass taxes, simply subtract $4,300 (or, if you rent at a typical Massachusetts rate, subtract $7,300) from your salary, and multiply by 5.3%.


*All this assumes you are single, have no children, and have an income less than $140,000. Furthermore, please remember that your withholding will not exactly reflect your tax liability. There are too many vagaries to the tax code for me to mention every possibility. I am not your tax advisor. This is not tax advice.
posted by trharlan at 7:44 PM on December 1, 2004


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