What Am I Really Getting Paid? A Guide To Your Pay Check
Taxes, like a lot of things in life, are inevitable. And a fact of life is that you're going to have to pay them. When you get your pay stub, it can often be confusing to decipher which money is going where, and how much you really end up with in your pocket. It's wise to know what the country and state is doing with your money. Here's our guide.
This is the big number, your bi-weekly or monthly salary before any deductions are made. So don't take this number at face value. What you really should be interested in is what follows.
Your place of work will have a unique plan that determines which deductions will be taken out of your paycheck, which can include any retirement plan, employee benefits, and any other special items. They can range anywhere from 0 to 100%, so if you're unsure about these deductions, check with your HR advisor, who can go over these items in detail. This will also be outlined in your employee agreement under a "Deductions from Wages" section.
State Income Tax
The state you live in is going to tax you, and these percentages vary, but generally remain under 10%. (Tip: if you don't want to pay state income taxes and are looking for a new job, try out these states!)
Federal Income Tax
This is the big guy, coming from Good Ol' Uncle Sam. Federal income taxes are a huge revenue source for the US of A and are determined by the status you select in your W-4. The percentage ranges from a minimum of 10% to about 40%. Check your rates, here. (Make sure you fill that out, because if you don't, the default is the maxiumum payment.)
FICA: Medicare and Social Security
Acronyms are sometimes confusing, but have no fear. FICA stands for the Federal Insurance Contribution Act. Depending on the amount that you earn, FICA will calculate Medicare and Social Security deductions. The current FICA rate is 7.65%.
Also depending on what kind of benefits you signed up for, these deductions are for health insurance and retirement plans.
Ah, we've made it. This is all yours. Take it, and keep it in a safe place.
There you have it. Taxes, at the end of the day, are a good thing. They help pay for the things we need to run our states and our countries. So next time you get your paycheck, know that you're contributing to the health of your nation.
Want to figure out your own paycheck deductions? Try this handy paycheck calculator tool here!