Monthly income tax calculator

Tax is annual, so a month cannot be taxed on its own

This is the mechanism behind almost every surprise on a payslip, and it is rarely explained anywhere.

Income tax runs on brackets that apply to a year of income. There is no monthly bracket and no monthly standard deduction — the deduction of $16,100 is an annual figure, and the 3 rates your income passes through are annual thresholds. A single month, taken in isolation, has nothing to be measured against.

So the calculation goes the long way round: multiply the month by twelve, tax the year, divide back. On $6,000 a month that is $72,000 a year, federal income tax of $7,010, Social Security and Medicare of $5,508, and $59,482 left — which is $4,957 a month.

The assumption buried in that arithmetic is that every month looks like this one. When it does, the answer is exact. When it does not — and for a great many people it does not — the monthly figure and the annual reality come apart, which is what the rest of this page is about.

Where the twelve-equal-months assumption breaks

Starting a job partway through the year. Payroll withholds as though your current pay ran all twelve months. Start in July on $6,000 a month and you earn $36,000 for the year, on which the real tax is $4,894 — but the withholding was set for $6,259. That gap, $1,365, is the refund a mid-year starter usually gets, and it is not a bonus: it is money that was theirs all along.

A bonus month. Supplemental pay is usually withheld at a flat rate rather than at your bracket, so the bonus month looks brutally taxed. Most of it comes back at filing, because the year is what counts.

Irregular income. A freelancer with three good months and nine thin ones is taxed on the year, not on the peaks. Annualising a good month produces a frightening number that never arrives.

A raise mid-year. Only the months after it are paid at the new rate, so the annual total lands between the two monthly figures — and the withholding, which assumes the new pay ran all year, runs slightly ahead.

In every one of those, the fix is the same: work out the year honestly and compare it with what has actually been withheld so far.

What comes out of $6,000 a month

Three separate charges, and only the first is progressive:

Federal income tax — $584 a month. $7,010 over the year, worked out on $55,900 of taxable income after the standard deduction.

Social Security — $372 a month. 6.20% of pay up to $184,500 a year. Flat, and it stops once the ceiling is reached — which is why a high earner's take-home rises partway through the year.

Medicare — $87 a month. 1.45% of everything, no ceiling at all.

Together, $1,043 a month, or 17.39% of gross, leaving $4,957. State income tax comes off that in forty-two states and is added when you pick one above.

Worth separating the two rates, because they get confused constantly: your bracket here is 22.00% and what you actually pay is 9.74% in income tax. The first governs your next raise; the second is what left your account.

The same calculation across monthly salaries

Single filer, federal and FICA only, no state:

$2,500 a month — $2,190 take-home, 12.38% of gross gone. Federal income tax $118 a month, FICA $191.

$4,000 a month — $3,396 take-home, 15.11% of gross gone. Federal income tax $298 a month, FICA $306.

$6,000 a month — $4,957 take-home, 17.39% of gross gone. Federal income tax $584 a month, FICA $459.

$9,000 a month — $7,067 take-home, 21.47% of gross gone. Federal income tax $1,244 a month, FICA $689.

$15,000 a month — $11,191 take-home, 25.39% of gross gone. Federal income tax $2,661 a month, FICA $1,148.

$25,000 a month — $17,931 take-home, 28.27% of gross gone. Federal income tax $5,678 a month, FICA $1,391.

The share taken climbs slowly, and never as fast as the bracket suggests — that is what progressive means in practice. The one place it flattens is above $15,375 a month, where Social Security has hit its annual ceiling and stops.

The state makes a bigger difference monthly than it looks annually

Nobody feels $3,000 a year. Everybody feels $250 a month — and that is the same number.

On $6,000 a month, what the state takes ranges across the country like this:

9 states take nothing at all, so the monthly figure at the top of this page is the whole story there.

The median state is West Virginia, at $201 a month — $2,409 over the year.

The most expensive is Oregon, at $404 a month, $4,850 a year. Against a no-income-tax state that is a difference of $404 in every monthly pay packet.

Which is worth holding next to the obvious caveat: a state with no income tax raises the money elsewhere, usually on property, and property tax is annual and invisible in a monthly calculation. Comparing two states properly puts both layers and the local price level into one figure.

The same figure weekly, fortnightly and by the hour

Monthly is how a salary is usually quoted and rarely how it is paid. On $72,000 a year, single filer, federal and FICA only:

Every month — $6,000 gross, $1,043 out, $4,957 in hand.

Twice a month — $3,000 gross, $522 out, $2,478 in hand.

Every two weeks — $2,769 gross, $481 out, $2,288 in hand.

Every week — $1,385 gross, $241 out, $1,144 in hand.

Two things follow that catch people out. Fortnightly is not twice-monthly: twenty-six cheques a year against twenty-four, so each one is smaller and two months a year carry an extra. And an hourly rate is not a salary divided by 2,080 once unpaid time is counted — the standard full-time year assumes no unpaid leave, which is not how most hourly jobs work.

For the same calculation laid out by pay frequency rather than by month, the paycheck calculator starts from the annual figure instead.

Using the monthly figure to budget

The number that matters for a household budget is the one at the top of this page, not the salary in the offer letter — and the distance between them is larger than most people carry in their head: 17.39% here, before any state tax.

Two adjustments are worth making before you treat it as spendable.

Deductions your employer takes. Health insurance premiums, retirement contributions and any benefit you pay into come out on top of tax. A pre-tax retirement contribution reduces the income tax above — enter it and the figure updates — but health premiums, parking and similar reduce take-home without reducing this calculation.

Months with five paydays. Anyone paid weekly or fortnightly gets a month or two a year with an extra cheque. Budgeting on twelve equal months and then treating those as windfalls is the usual way round; budgeting as though every month has them is how people run short.

If the figure here is well above your actual payslip, the gap is almost always one of three things: a state income tax, employer deductions, or a W-4 that no longer matches your circumstances.

Reading the monthly payslip against this figure

A payslip is a poor teacher because it lists everything in the order the software finds it rather than in the order it happens. The order that matters is this:

Gross pay — $6,000 here. Everything below comes out of it.

Pre-tax deductions — traditional retirement contributions, and under a § 125 plan health, dental and vision premiums. These reduce the income the tax is worked out on, and the § 125 ones reduce Social Security and Medicare too, which retirement contributions do not.

Federal income tax — $584 a month here, and the one line on the payslip that is a forecast rather than a fact. It comes from the W-4 you filed, and the year-end return settles the difference.

Social Security and Medicare — $459 a month, and these are facts, not forecasts. Flat rates on wages, no estimate involved.

State and local tax — nothing in nine states; in the rest it lands here.

Post-tax deductions — union dues, garnishments, Roth contributions, some insurance. These reduce what reaches your account and change no tax at all.

The number at the bottom is what this page computes. If yours is lower, walk down that list: it is almost always a pre-tax or post-tax deduction rather than a tax.

Turning a job offer into a monthly figure

An offer arrives as an annual number and gets spent as a monthly one, and the translation is where people overcommit.

$72,000 a year sounds like $6,000 a month. It is $4,957 before a state takes its share and before the employer deducts anything — a gap of $1,043 every month, which is what most first mortgages are underwritten against.

Two offers in different states are not comparable on the annual figure either. The same $72,000 leaves a different amount in each, and the difference is the state line in the section above — before counting what a house costs in one place against the other.

And a raise is not what it looks like. The next $1,000 a month of gross at this level is worth $704 a month after federal tax and FICA, because it is taxed at your marginal rate rather than your effective one. That rate is what to negotiate against.

Two incomes in one household, monthly

A household budget runs on one pot, and the tax on that pot is not the sum of two separate calculations.

Filing jointly, the brackets are wider and the standard deduction is larger — $32,200 against $16,100 — so two people earning $6,000 a month each keep more together than two single filers on the same money would.

On $6,000 a month each — $144,000 between them — the joint federal bill is $25,036, or $2,086 a month. Two single filers on the same incomes would pay $25,036, so filing jointly is worth $0 a month here.

Where it changes character is when the two incomes are very unequal. A single earner supporting a household gains most from the joint brackets; two similar salaries gain least, because the wider bands were already being used.

The trap in a two-income household is withholding rather than tax. Each employer withholds as though its salary were the only one, so both under-withhold against a joint return and the couple owes at filing. The W-4 has a box for exactly this, and it is the single most common reason a two-earner household gets an unexpected bill.

What the monthly figure means for rent and a mortgage

Lending rules are written against gross income and household budgets are lived in net, and the distance between them is this page.

The common guideline is that housing should not exceed about 28% of gross monthly income and total debt about 36%. On $6,000 a month that is $1,680 of housing — which sounds fine until you notice it is 33.89% of your actual take-home of $4,957, before a state has taken anything.

In a state with its own income tax the same rule of thumb bites harder still, and in a high-tax one it can mean half of what actually reaches the account.

Which is the practical reason to work in the net figure: the lender's arithmetic tells you what you can borrow, and this one tells you what you can live on. They are different questions and only the second is yours.

Fixing the monthly figure when it is wrong

If the tax on your payslip does not match this page, the lever is the W-4, and it is worth understanding what it actually does.

The form no longer works in "allowances". It asks for your filing status, whether there is a second job in the household, how many dependants you claim, and then gives you two direct levers: Step 4(a) adds other income the employer does not know about, and Step 4(c) adds a flat extra amount of withholding to every paycheck. That last box is the blunt instrument that fixes most mismatches.

The arithmetic is straightforward once you have the annual figure. Take the tax this page gives for the year, subtract what has already been withheld, divide by the number of pay periods left, and put that in Step 4(c). It is the same calculation whichever direction the gap runs.

Two situations make it worth doing rather than waiting for April. A second income in the household, where each employer withholds as though its salary were the only one and both come up short. And a large refund, which feels like a win and is a year of lending money at zero interest — on a typical refund that is several hundred dollars a month that could have been in the account instead.

The withholding estimator runs that comparison directly against what you have had withheld so far.

When your monthly pay changes partway through the year

The annualising assumption is at its weakest exactly when life is most eventful, and the pattern is always the same: payroll believes today's pay has run all year.

A raise — withholding jumps to the level of the new salary immediately, though only part of the year was paid at it. The year's real tax lands between the two, so a raise usually produces a small refund.

A pay cut, or reduced hours — the mirror image. Withholding drops to the new level while the earlier, higher months are already in the year's total, so tax can be owed at filing.

A gap between jobs — the strongest version. Months with no pay pull the annual total down while every month worked was withheld as though the year were full. This is where the largest refunds come from, and it is also why a redundancy year rarely costs what people fear.

A second job started mid-year — the dangerous one, because it runs the other way: two employers each withhold against their own salary alone, neither sees the combined income, and the shortfall lands in April.

In all five, the answer is the same and it is not complicated: estimate the year, compare it with what has been withheld, and correct with Step 4(c) rather than discovering it at filing.

What this does not model

Uneven months. Twelve equal ones are assumed. For irregular income the honest approach is to estimate the year and compare it with what has been paid in so far.

Itemised deductions and credits. The standard deduction is applied, which is what most filers take. Credits — child tax credit, earned income credit — come off the tax itself and are not included here.

Self-employment. A freelancer paying themselves monthly owes both halves of FICA and pays quarterly rather than through withholding, which is a different calculation.

Local income tax. Eleven states let counties or cities charge their own, and this page covers federal and state only.

Anything your employer takes. Health, dental and vision premiums, parking, union dues and post-tax deductions all reduce what reaches the account and none of them is tax. They are the usual reason a real payslip comes in below the figure here.

Questions

How much tax do I pay on $6,000 a month?

$1,043 a month as a single filer — $584 of federal income tax and $459 of Social Security and Medicare — leaving $4,957. That is 17.39% of gross, before any state income tax.

Why can you not just tax one month on its own?

Because the brackets and the standard deduction are annual figures. A month has nothing to be measured against, so the calculation multiplies by twelve, applies the year's rates, and divides back. It is exact when every month is the same and approximate when they are not — which is the single most useful thing to know about a payslip.

I started my job in July. Why is so much being withheld?

Because payroll withholds as though your current pay ran the whole year. On $6,000 a month starting in July you earn $36,000 and really owe $4,894, while the withholding is set for $6,259. The difference, about $1,365, comes back as a refund — it was never the government's money.

What is the difference between this and the paycheck calculator?

The direction. This one starts from what you earn in a month; the paycheck calculator starts from an annual salary and splits it across whatever pay frequency you are on — weekly, fortnightly, twice a month. Same engine underneath, opposite question.

Does a bonus get taxed at a higher rate?

It is usually withheld at a flat supplemental rate, which is not the same thing. The bonus is taxed as ordinary income over the year like everything else; the withholding on that one cheque simply runs ahead of the real figure, and the excess comes back at filing.

What is $6,000 a month after tax?

$4,957 as a single filer, federal and FICA only — 17.39% of it goes. That is $59,482 over the year. A state income tax comes off that figure in forty-two states, and employer deductions like health premiums come off on top.

Should I budget on gross or net?

Net, always — and the gap is larger than most people carry in their head. $6,000 a month gross is $4,957 in hand before any state tax. Lending rules are written against gross, which is why the mortgage you qualify for and the one you can live with are different numbers.

Is my monthly take-home the same every month?

Not exactly, for two reasons. Social Security stops once your pay for the year passes $184,500, so higher earners see take-home rise later in the year. And anyone paid weekly or fortnightly has a month or two with an extra cheque.