Our Calculation Methodology

First, we convert your annual base salary or hourly wage into a per-pay-period gross amount. This is determined by your chosen pay frequency:

• Weekly: 52 pay periods per year.
• Bi-weekly: 26 pay periods per year.
• Semi-monthly: 24 pay periods per year (typically 15th and end of the month).
• Monthly: 12 pay periods per year.

For hourly workers, Gross Wages = (Hourly Rate × Regular Hours) + (Overtime Rate × Overtime Hours) worked during that specific pay cycle.

Pre-tax deductions represent money that is taken out of your paycheck before government income taxes are calculated. By reducing your taxable income, these deductions lower the amount of tax you owe.

We subtract the following contributions from your gross pay to determine your Federal Taxable Gross Income (and State Taxable Gross Income, where applicable):

• Traditional 401(k) / 403(b) retirement plans.
• Health Savings Account (HSA) & Flexible Spending Account (FSA) contributions.
• Pre-tax health, dental, and vision insurance premiums.

FICA withholdings are mandatory payroll taxes assessed under federal law. They are computed as flat percentages of your gross wages (unlike income taxes, pre-tax deductions generally do not reduce Social Security and Medicare taxable basis, except for Section 125 plan premiums):

• Social Security: Assessed at 6.2% on your wages. This tax applies only up to the annual Social Security wage base limit ($168,600 for the current calendar tax year). Any earnings above this cap are exempt.
• Medicare: Assessed at 1.45% on all wages. There is no wage cap.
• Additional Medicare Tax: Under the Affordable Care Act, an extra 0.9% tax is levied on wages exceeding $200,000 for Single taxpayers (or $250,000 for Married Filing Jointly).

To compute federal and state income tax, we must first deduct the Standard Deduction. The Standard Deduction is a fixed amount of income that is shielded from income taxes.

We divide the annual Standard Deduction (which depends on your filing status: Single, Married Filing Jointly, Head of Household) by your total pay periods, and subtract it from your pay-period taxable income to find your final taxable baseline for that paycheck.

With your final taxable federal income calculated, we apply the progressive tax brackets. In a progressive system, your income is taxed in chunks. For example, if you are in the 22% tax bracket, only the portion of your income that falls within that specific range is taxed at 22% — the rest is taxed at 10% and 12%.

We run your taxable wages through these bracket formulas sequentially, calculate the total annual tax liability, and divide it by the number of pay periods to find the per-paycheck federal income tax withholding.

State tax withholdings are processed next. Because each state manages its own treasury, we apply state-specific logic based on your location:

• Flat-Tax States: We apply a single fixed percentage (e.g., Colorado's 4.4% or Illinois' 4.95%) to your taxable income.
• Progressive-Tax States: We apply state-specific progressive bracket tables, subtracting state-level standard deductions or personal exemptions first.
• No-Tax States: States like Texas, Florida, and Nevada receive a $0 state withholding calculation.

Finally, we subtract post-tax deductions. Unlike pre-tax deductions, post-tax deductions do not reduce your tax obligations. They are pulled directly out of your net pay after federal, state, and FICA calculations are done.

Examples include Roth 401(k) contributions, post-tax life insurance policies, union dues, or payroll garnishments.