Welcome to 2024! Since you’ve clicked through to this tool, we know you’re here to estimate what your take home pay will look like after all those federal income and payroll taxes have been taken out of your paycheck. But do you know when federal income tax withholding became a thing?The practice dates back to 1943 and has been a fact of life for Americans for over 70 years. At the time, the U.S. government fighting World War 2 and was desperate to increase the amount of cash it had on hand to support its efforts. The income withholding tax was its solution, putting employers into the role of tax collectors. The law let the U.S. government collect income tax revenue with each paycheck instead of having to either wait for the end of each quarter or when taxpayers would file their annual income tax returns. The new withholding tax became law on 25 June 1943 and went into operation on 1 July 1943. Here’s the headline announcing the new income tax collection method from The Butler County Press:
Seventy-plus years later, withholding income taxes has become a bit more complicated. Things like how much you invest toward your retirement in a pre-tax 401(k) retirement account at work and whether you take advantage of your employer’s health or dependent care pre-tax flexible spending accounts influences how much money Uncle Sam will take out of your paycheck.Our 2024 paycheck tool can help you find out how much is left after the U.S. government has taken what it can from your paycheck. If you’re reading this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool. Otherwise, you’re more than welcome to enter whatever numbers you want to consider for what your paychecks might look like in 2024 and you can even find out what getting a raise might change your take-home pay.
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The tool’s results convey how much money the IRS withholds for federal taxes from each of your paychecks in 2024. There are however a number of factors that will complicate your withholding tax results based upon how much you cumulatively earn during the year.For example, once your cumulative income reaches $168,600 or higher, you will no longer have Social Security’s payroll tax of 6.2% of your income deducted from your paycheck (if you’re self-employed, that payroll tax is 12.4%). The tool above is designed to provide withholding tax estimates for the majority of Americans who are employed by others. People making this amount of money don’t really get a break however, because they’ve already been pushed into a higher tax bracket, paying higher regular income tax rates than those paid by over half of all income-earning American households.There’s also the complication provided by the so-called “Additional Medicare Tax” that your employer is required to begin withholding from your paycheck if, and as soon as, your year-to-date income rises above the $200,000 mark. This surtax of 0.9% of gross income was imposed by the “Affordable Care Act” (a.k.a. “Obamacare”) in 2010, which is still in effect. Since the money collected through this surtax does not directly support the Medicare program, unlike the real Medicare payroll taxes paid by you and your employer, it is really best thought of as an additional income tax. That additional income tax is not adjusted for inflation, which means that those who must pay it are subject to 1970s-style income tax bracket creep, even though the tax was sold on the claim that it would be limited to only very high income earners.In the tool above, when the amount of your annual 401(k) or 403(b) retirement savings contributions exceed the annual limits set by law, we’ve limited the results our tool provides to be those consistent with their statutory limits, and will do so as if you specifically set the percentage contributions for these contributions with that in mind. Our tool does not consider whether you might take advantage of the “catch-up” provisions in the law that are available to individuals Age 50 or older. Those annual contribution limits will remain at $7,500 in 2024. Elsewhere on the WebThere are other salary and hourly paycheck calculators like this on the Internet, including the very well done tools available at PaycheckCity.com. PaycheckCity’s PaycheckCity.com allow you to determine the amount of state income tax withholding that will be taken out of your paycheck in addition to what the federal government will take out. Payroll processing giant ADP also has a salary paycheck calculator that will give you good results. We still find the format of PaycheckCity.com to be more user friendly, but ADP’s version has the benefit of having an all-in-one user interface.If however you live in one of the states that have no taxes on earned income (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming), our tool above will provide you with a very good estimate of your actual take-home pay after Uncle Sam has gotten his dirty ape paws all over it. Previously on Political CalculationsWe’ve been in the business of calculating people’s paychecks (not including state income tax withholding) since 2005!
Image credit: The Butler County Press. Vol. XLIII. No. 13. (Hamilton, Ohio), 25 June 1943. Chronicling America: Historic American Newspapers. Lib. of Congress. [Online Database].More By This Author:What’s Your U.S. Income Percentile?Lifetime Income Trajectories By Education Level S&P 500 Jumps After Fed Pivots On 2024 Rate Cuts
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