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Federal Tax Withholding Table Guide

Are you familiar with the federal tax withholding table? If you have taxable income, unfortunately, a chunk of what you earn gets taken away. The federal tax table determines this chunk. If you’re an employer, you need this table to know how much you should deduct from your workers’ salaries. And if you’re an employee, you need to check out this table, so you know what you should and shouldn’t be paying. So, here’s everything you need to know!

Federal Tax Withholding Table: 9 Things You Need to Know

In this article:

1. What is the Federal Tax Withholding?

First, when you start working, you might notice deductions on your payslip. It’s your employer withholding a part of your salary to pay federal taxes. These taxes keep the US government afloat, and helps them fund development projects and welfare programs. In addition to conventional income tax withholding, you could also be paying social security and Medicare withholding.

2. How Does Federal Tax Withholding Affect Me?

If you’re an employee, all your earnings are subject to tax withholding. Your annual income isn’t the only thing being taxed, since the IRS will also tax earnings from gambling, prizes, cash gifts, and other earnings. If you’re an employer, you’re mandated to withhold the right amount of income from your employees, so you can pay federal taxes. You might ask, how much do you have to earn to pay taxes? Well, everyone has to pay, eventually.

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3. You Should Check Your Federal Withholding Because of the 2018 Tax Act

The US implements a system of progressive taxation. This means the more money you make, the higher your tax rates. But with the recent Tax Cuts and Jobs Act, you might see some changes to your paycheck very soon. This is a landmark piece of tax reform, which makes understanding taxes simpler for the ordinary taxpayer.

4. Here’s the Federal Tax Withholding Table for 2018

A federal tax withholding table shows bosses and businesses how much to income to withhold from employees. For 2018, here’s the federal tax table for withholding. The table shows the percentage that should be deducted, based on income, marital status, and other factors. If you notice your employer deducting more income than mandated, don’t ignore it. More than 70% of American taxpayers suffer from their income being over-withheld. As a result, they paid more taxes, and received refunds when they filed their tax returns.

5. How Has the Federal Tax Withholding Table Changed?

The Tax Cuts and Jobs Act made a lot of changes to the tax system. Tax rates changed, brackets were expanded, so people could pay less. The standard deduction increased, so less people chose to itemize their deductions. With these new developments, employees should keep a closer eye on their federal tax withholding. If you have dependents, or are part of a two-income family, look at your tax withholding. Taxpayers in less conventional situations, like those who itemize deductions or work part-time, should also check their withholding. You never want to pay more than you should.

6. The Withholding Tax Calculator

Lucky for us, the IRS developed a withholding tax calculator. This tax calculator helps you estimate the right amount of withholding you should be paying, so check it out!

7. Forms New Employees Need to Fill

If you’ve just started working, you need to complete some forms for tax withholding. The most important form is Form W-4, since employers need this to estimate how much income to deduct. For state and local tax withholding, it depends on where you live, since some states only charge federal taxes.

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8. State Tax Withholding

Federal tax withholding and state tax withholding are two completely different things. Your state government could impose additional income taxes, which would also be withheld from your salary. You should be aware of income tax rates by state, so you don’t get scammed and pay too much. Some states, like Wyoming and Nevada, don’t impose an income tax. So, make sure to observe your state withholding tax as well!

9. Can I Get a Tax Refund?

Yes! As we’ve mentioned before, a lot of people pay more taxes than they should, and get refunds from the IRS. This is why it’s important to keep up with changes to the tax system, and to know the appropriate amount of tax withholding. Calculating your tax refund is simple, and anyone can do it!

Do you have any more questions about the new federal tax withholding tables? Then watch this video from Build Your Tomorrow below!

The federal tax withholding table gives everyone a guide on how much taxes to pay. The new tax act made a lot of changes to this table, which could help individual taxpayers. Taxpayers need to know about these changes, so they can maximize them and save their income. With the right financial habits and information, you’ll secure your future!

Do you have any questions about the federal tax withholding table? Then comment them below!

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