Payroll Withholding Calculator: What to Withhold From a Paycheck

How it works

Federal income tax follows the IRS percentage method in Publication 15-T (2026) for employees with a Form W-4 from 2020 or later. Annual wages = pay × pay periods, plus Step 4(a), minus Step 4(b), minus $8,600 ($12,900 if married filing jointly) unless the Step 2 box is checked. Find the tax on that amount in the IRS table, subtract Step 3 credits, divide by pay periods and add Step 4(c).

Social Security is 6.2% of wages up to $184,500 for the year. Medicare is 1.45% of all wages, plus an extra 0.9% withheld from the employee on wages above $200,000. You match the 6.2% and 1.45%. Federal unemployment (FUTA) is 0.6% of the first $7,000 per employee, paid only by you.

Deposit = federal income tax withheld + the employee’s Social Security and Medicare + your matching amounts.

A worked example

A single employee is paid $2,000 every two weeks and checked nothing special on the W-4. Annual wages are $52,000. Subtract $8,600 for a $43,400 adjusted amount. The IRS table gives $1,240 + 12% of the amount over $19,900 = $4,060 for the year, or $156.15 a paycheck.

Social Security is $124.00 and Medicare $29.00. The employee’s taxes total $309.15 before any state tax. You owe a matching $153.00 plus $12.00 of federal unemployment tax. You deposit $462.15 with the IRS, and the paycheck costs you $2,165.00.

Prefer to work it out yourself? Step-by-step guide: do this calculation by hand or in a spreadsheet.

Common mistakes

• Treating a worker as a contractor to skip withholding. The IRS looks at control over how and when the work is done, not the label.
• Spending withheld tax. It is the employee’s money held for the IRS, and unpaid payroll tax can bring personal liability for the owner.
• Forgetting your own half. The employee’s Social Security and Medicare are matched by you, so every paycheck costs 7.65% more than the wage.
• Skipping the W-4. Without one, withhold as single with no adjustments.

What this doesn’t tell you

This covers federal income tax, Social Security, Medicare and federal unemployment on a regular paycheck. State and local income tax, state unemployment, workers’ comp, pre-tax benefits, and bonuses paid on a separate check are not included. Head of household is calculated up to $271,750 of adjusted annual wages (about $280,000 of pay), or $140,175 with the Step 2 box checked; above that, use the IRS tables. Your payroll software does these calculations for you each pay day.

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Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.

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