Happy 2021! As we officially put 2020 behind us, it’s time to look forward to puzzle out what your paycheck will look like this year after the U.S. government has bitten off a chunk from it.
We’re starting with the assumption that a significant number of Americans haven’t filed new W-4 tax witholding forms to take advantage of the simpler withholding rules that took effect in 2020. If that situation applies for you, our 2021 tool can accommodate your situation, but you will likely find the newer rules let you keep more of the money you earned from working. Better still, you can use our tool to test drive how your paycheck would change if you did file a new W-4 with your employer.
This year’s tool is also set up to capture any big changes you may have made in your job. Is this the year that you’ll crank up how much money you might invest in a pre-tax 401(k) retirement account at work? Does your employer offer health or dependent care pre-tax flexible spending accounts that you might use this year? What if you get a raise sometime during the year?
Our 2021 paycheck tool can help you find out how the answers to these questions can affect your paycheck and more! If you’re reading this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool. Otherwise, just start entering whatever numbers you want to consider for what your paychecks might look like in 2021.
Now that we’ve given you a sense of how much money you’ll have withheld by the IRS in 2020 from each of your paychecks, we should note that there are some factors that can really complicate your withholding tax results depending upon how much you cumulatively earn during the year.
For example, in 2021, once you have earned over $142,800, you will no longer have the Social Security payroll tax of 6.2% of your income deducted from your paycheck (or 12.4% if you are self-employed, where our tool above is designed for those employed by others). But then, by the time that happens, you’ll have long been paying taxes on your income that are taxed at rates that are at least 10% higher than those paid by over half of all Americans.
There’s also the complication provided by the so-called “Additional Medicare Tax” that your employer is required to begin withholding from your paycheck if, and as soon as, your year-to-date income rises above the $200,000 mark, which is one of the new income taxes imposed by the “Affordable Care Act” (a.k.a. “Obamacare”) that are still in effect. Since the money collected through this 0.9% surtax on your income does not go to directly support the Medicare program, unlike the real Medicare payroll taxes paid by you and your employer, it is really best thought of as an additional income tax. Since it has not ever been adjusted for inflation, that means that you could someday be subject to it through 1970s-style bracket creep, even though the tax was sold on the claim that it would be limited to very high income earners.
In the tool above, in case the amount of your annual 401(k) or 403(b) retirement savings contributions exceed the annual limits set by law, we’ve limited the results our tool provides to be those consistent with their statutory limits, and will do so as if you specifically set the percentage contributions for these contributions with that in mind. Our tool does not consider whether you might take advantage of the “catch-up” provisions in the law that are available to individuals Age 50 or older, which increase those annual contribution limits.
Elsewhere on the Web
There are other salary and hourly paycheck calculators like this on the Internet, including the very well done tools available at PaycheckCity.com. We really like PaycheckCity’s Salary Paycheck Calculator because it allows you to determine the amount of state income tax withholding that will be taken out of your paycheck in addition to what the federal government takes out. Payroll processing giant ADP also has a salary paycheck calculator that will give you good results, but we still find the format of PaycheckCity’s version to be more user friendly.
Then again, if you live in one of the seven states that have no personal income tax for wage and salary income (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming), our tool above will provide you with a very good estimate of your actual take-home pay.
Previously on Political Calculations
We’ve been in the business of calculating people’s paychecks (not including state income tax withholding) since 2005!
- Your 2005 Paycheck
- Your 2006 Paycheck
- Your 2007 Paycheck
- Your 2008 Paycheck
- Your 2009 Paycheck
- Your Paycheck in 2010
- Your Paycheck in 2011
- Your Paycheck in 2012
- Your Paycheck in 2013: Part 1 – the “same as 2012″ version.
- Your Paycheck in 2013: Part 2 – the “over the fiscal cliff” version.
- Your Paycheck in 2013: Part 3 – the “post-fiscal cliff deal” version.
- Your Paycheck in 2014
- Your Paycheck in 2015
- Your Paycheck in 2016
- Your Paycheck in 2017
- Your Paycheck in 2018, Before the Tax Cuts Kick In
- Your Paycheck in 2018, After the Tax Cuts Kick In
- The Bottom Line for Your 2018 Paycheck After the Tax Cuts
- Your Paycheck in 2019
- Your Paycheck in 2020
- Your Paycheck in 2021
Image Credit: Kettner, Magnus. “Puzzled”. The Winslow Mail. (Winslow, AZ), 06 March 1925. Chronicling America: Historic American Newspapers. Lib. of Congress.
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