Payroll Deductions Calculator Overview
We all work hard for our money, so we all want to make use of our money as wisely as possible. One way to maximize your income and minimize your taxes is to choose wisely when making payroll deductions from your paycheck.
What deductions and how many deductions you choose to be taken from your payroll can directly affect your income and tax situation. It may become a pay now or pay later situation, but armed with the right tools (this calculator for example) you can ascertain the impact that making changes to your payroll deductions may have.
You may find that by altering your allowances and withholdings, you can add a substantial amount to your take-home pay. However, it is important to remain aware that taxes will need to be paid eventually, and consider whether it is worth holding onto your salary in the short term. Also consider whether you have the self-discipline not to spend the money that you will need to pay at the end of the year.
How to Use the Payroll Deductions Calculator
Fill in the boxes, as follows. You can enter the information directly or use the sliding scale to explore how changing different factors will affect your paycheck:
- In the top section, add the amount of salary you have been paid so far this year – this can usually be found on your latest paycheck
- Select from the drop-down list the regularity of your salary payments
- Referring to your most recent paycheck, enter the relevant information in the Current Paycheck section – if you aren’t sure, you can click on any of the descriptions to see a full explanation of the term
- In the New Paycheck section, start by entering precisely the same information as in the Current paycheck section
- Make some alterations in the New Paycheck section
- Click "View Report" to compare your take home pay between your Current paycheck and your New paycheck
Who is this Calculator for?
This calculator is most useful if you:
- Would like to see the effect that tax allowances and withholdings have on your take-home pay
- Will soon be entitled to more allowances and would like to know how it will affect you
- Would like to compare the effect on your take-home salary of different deductions such as pension payments and health insurance.
What if I don’t know how many allowances to claim?
In this case, it is perfectly acceptable to leave the decision and the necessary calculations in the hands of your employer. Typically, social security tax, federal income tax, state tax, local tax and Medicare taxes are withheld by employers by default. You are only required to take action in this situation if you know that your employer is claiming the wrong allowances.