I am trying to calculate the formula used to obtain my Federal Tax from my bi-weekly paycheck, so that I can anticipate future raises, and plan for my retirement accordingly.

I was able to calculate other formulas, such as my Medicare deduction, however I am having difficulty figuring out the exact formula for the Federal Tax deduction. My calculations are consistently short by about $20 per check.

I am single, and I am currently taking 4 allowances. I used the IRS publication 15-A and I am fairly certain I am reading the tax table correctly. The only thing I can think of is whether I may have bumped up my allowances this past February?

Does anybody know of anything else that could affect the calculation, such as the Feds perhaps capping the taxable amount once a gross wage limit is reached? I have searched the net three ways to Sunday, and I am utterly confused. Thanks in advance for any advice.


1 Answer 1


Depending on your gross pay, a $20 difference may be "close enough".

Your deductions are only estimates and do not account for prior pay or deductions, future raises, etc. They just take your taxable pay for that period (gross pay less any tax-exempt deductions like 401(k)), extrapolate to determine how much tax you'd owe for the entire year (given your taxable pay and the number of allowances you claim), and determine the portion of tax for that period that should be deducted.

Those variables (taxable pay, period and allowances) are used to look up the amount to deduct in the IRS tax wihholding tables, or calculated using the Percentage Method in the same publication.

When you file at the end of the year, your actual tax will be calculated, and your total deductions will be subtracted from that amount to determine how much left you owe (or how much will be refunded to you).

Medicare and Social Security are different because it is a set percentage of your pay, not bracketed. When you reach the limit for Social Security tax, your employer should just stop deducting it - there is no extrapolation to an annual amount like income tax.

The best way to estimate tax is to estimate how much total taxable income you will have for the year and use the tax brackets to estimate total tax. Mane of the free calculators out there will do that for you, but don't expect the amount deducted from your paycheck to be exact.

If that sounds complex, it is, especially if you itemize deductions and/or have irregular pay. The goal is not to be exact; it's to be close enough so you don't underpay too much and risk penalties or to withhold too much and have a huge refund (which messes up your cash flow).

Another approach to estimate the impact of changes is to look at your marginal tax rate (or tax bracket). If your total taxable income is within a certain bracket, say 25%, then every extra dollar you earn (or pre-tax deduction you add) will increase (reduce) your tax by 25%. That can be more helpful to determine the impact of a raise or increasing retirement than trying to estimate the amount that will be withheld (and is more important).

  • There is no limit for Medicare tax; it applies to all wages. There is a limit for Social Security tax, and once the yearly wages exceed this limit, the employer stops deducting Social Security tax on the wages paid the rest of the year, Commented Dec 15, 2017 at 17:01
  • @DilipSarwate Thanks - I always forget which one is limited. Fixed.
    – D Stanley
    Commented Dec 15, 2017 at 17:04
  • Unless/until the Republicans change it, there is also 'Additional' Medicare Tax starting at $200k but (unlike SS and standard Medicare) modified for married filing jointly; compare money.stackexchange.com/questions/13499/… . Also note if any of your income is qualified dividends or longterm (realized) gains from investments, those are taxed using different (lower) rates -- again unless changed. Commented Dec 17, 2017 at 9:16

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