Voiceover: Let’s say that
you’re a single person
who is making $50,000 a year.
Let’s figure out what
your actual take-home pay
would be after paying
federal income taxes,
and then in a future video,
we can also think about
what your state income taxes might be
if you’re in a state
that has income taxes.
So the first thing we need to think about
is what is our taxable income?
This $50,000, which is what you kind of
think your salary is,
this is your gross income,
and to get your taxable income,
we have to think about things
like exemptions and deductions.
I’m not going to go into a bunch of depth
right over here,
but if we just assume that you are a very
plain vanilla tax filer,
you’re just going to take
the standard deduction,
and you don’t have a bunch of, you know,
donations to charity or whatever else,
or a mortgage, interest,
or whatever else you might want to deduct.
You would take the standard deduction,
and then if you’re just an individual,
you’re only taking ownership for yourself,
only responsibility for yourself,
you get to have the personal exemption.
If you have a spouse, if you have kids,
you might have larger
exemption right over here.
The key about the
deduction and the exemption
is these aren’t deducted from your taxes.
These reduce your taxable income,
so you started at a
gross income of $50,000.
Let’s subtract out 6,100
for the standard deduction
and then 3,900 for the personal exemption,
and so your taxable income,
at the federal level,
is going to be 50,000 minus this stuff,
so this stuff adds up
to $10,000 of deductions
and exemptions,
so your taxable income is $40,000.
Now, from this $40,000,
we can figure out how much you pay
in federal income taxes.
Right over here, I’ve done part of
the current federal tax brackets.
These change over time,
so the real basic idea for this video
is to get the idea of
how these brackets work.
These brackets might
change from year to year,
and many people say, “Okay, $40,000.
“It falls into this
bracket right over here,
“and this bracket’s at 25%,
“so the federal income tax must be 25%
“of the $40,000.”
That is not how a tax bracket works.
The way it works is you
pay 10% on the first 8,925,
then 15% on the increment up to 36,250,
and then 25% on the amount
that is above 36,250.
So let’s calculate what that is.
Get the calculator out.
We’re going to pay 10% of the first 8,925,
8,925.
I have trouble pressing
buttons on this calculator.
And then to that, we’re going to pay 15%
on the next increment up to 36,250,
so that increment is 36,250 minus 8,925.
Once again, I have trouble
typing in a 5 there.
And then, I’m going to
pay 25% on the increment,
on the increment above 36,250,
so our taxable income is 40,000,
so it’s 40,000 minus 36,250.
And, let’s see.
Did I type that in right?
Yup, that looks pretty right,
and I get 5,92-,
I’ll just round, $5,929.
So this gets us to $5,929
of just straight up,
what I’ll just call straight up federal,
federal income tax.
Let me put that here. This
is federal income tax.
Now, we aren’t done at the federal level.
You also have what’s
often called the FICA tax,
or your share of the FICA tax.
This stands for the federal insurance,
Federal Insurance Contributions Act, FICA,
and this is essentially what you pay in
into social security and Medicare.
Right over here, although “emp” could be
an employer or employee,
so let me make this clear,
this is the employee’s share of FICA,
which you pay 6.2% for social security,
1.45%, and you don’t take
into account deductions
or exemptions,
so you’re going to pay it
on the original $50,000,
so let’s calculate what
that’s going to be.
So it’s 50,000 times,
and you’re going to pay 0.062,
6.2% for social security,
and then you’re going
to pay another 1.45%,
1.45% for Medicare,
and then that gives you your FICA tax.
It’s $3,825,
so $,3825 in your share of FICA taxes,
and I keep talking about
your share of FICA taxes.
Your employer will also separately,
this is the part that
gets taken out of your,
out of your salary.
Your employer will also pay another 3,825
that you will never see.
So this is essentially
half of the FICA taxes
that will go to the government
due to the fact that
you are working for your employer.
But now we have all of the taxes
that you are going to pay,
or all of the things
that are going to come out of your,
out of your payroll,
and so we can add those two things up.
We have the 3,825 plus the $5,929
gets us to 9,754.
9,754 in total federal things
that are taken out of your paycheck,
and so your take-home pay is going to be
$50,000 minus this right over here,
so that’s going to be 50,000 minus 9,754,
54,
it gets us to 40,246,
so 40,246 is what you are left with
if we just take into
account the federal things,
the taxes and the FICA tax
that are taken out of your pay,
out of your paystub, essentially.
Now, if you are in a state
that does not have state income taxes,
and a city that does not
have local income taxes,
you’re done.
This would be your take-home pay.
In the next video,
we’ll think about how much more
will be taken out of your,
out of your pay if you are in a state
that has state income taxes.

Calculating federal taxes and take home pay | Taxes | Finance & Capital Markets | Khan Academy
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38 thoughts on “Calculating federal taxes and take home pay | Taxes | Finance & Capital Markets | Khan Academy

  • March 6, 2013 at 12:52 am
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    Very informal. Thank you.

    Reply
  • March 6, 2013 at 2:53 am
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    Ouch. Sucks a lot of my money will end up going to subsidize big bank failures. America!!

    Reply
  • March 6, 2013 at 3:32 am
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    Oh dang. Thanks for making this video. I had no idea how the tax brackets actually worked.

    Reply
  • March 6, 2013 at 4:03 am
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    Sal, this was great. Can you please do a video on how adjusting withholdings affects your take home pay and also what the penalty is if you don't pay enough in tax/what that threshold actually is?

    Reply
  • March 6, 2013 at 4:12 am
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    Is there anything you don't know how to do?

    Reply
  • March 6, 2013 at 4:56 am
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    How about that income taxes are a scam created in 1913 when the FRA was enacted in secrecy? Yeah, figure that one out. Also maybe paying taxes on inflation created by the Fed (a private bank). Really all this "income tax" is just bullshit. It's the greatest theft ever invented.

    Reply
  • March 6, 2013 at 1:45 pm
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    No, the $40,000 was just a number used to find out how much you have to pay for your federal income tax.

    Reply
  • March 6, 2013 at 6:30 pm
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    If there is, he can always learn about it, and then teach us about it, or another Khan Academy instructor will.

    Reply
  • March 6, 2013 at 6:33 pm
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    In college, it takes professors at least 2-3 hours to get through a lesson like this. Talk about inefficiency. No wonder it takes so long to earn a bachelor's degree, that and all of the worthless courses they make you take to justify charging you for an extra two years of tuition. For those of you who don't know, most people don't start learning about their major until their their year. More than half of the time in college is spent doing nonmajor work.

    Reply
  • March 14, 2013 at 2:17 am
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    Great vid on fed tax calculation, except I'm really pissed now!

    Reply
  • March 14, 2013 at 2:18 am
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    No wonder there isn't much left over!

    Reply
  • March 22, 2013 at 8:42 am
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    Thanks Sal for simplifying learning. You get to the point. And you answer questions we have by anticipating them as you go along. And that's what puts you ahead of rest.

    Reply
  • March 22, 2013 at 8:59 am
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    How on earth did we end up with $70TRILLION of unfulfilled FICA entitlements? That's more than US GDP years on end. My generation's inheritance. Makes me sick!!

    Reply
  • April 10, 2013 at 1:07 pm
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    What Sal should have added is that nearly 20% (19.5% to be exact [9754/50000*100=19.5]) of the average American income is paid to the Federal government. Then add gasoline tax, fees and other taxes on nearly everything one buys and then you get the Federal government collecting a large percentage and a large amount of money from every worker.

    Reply
  • April 14, 2013 at 12:34 pm
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    u huys always come in clutch appriciate the knowledge like the history segments too

    Reply
  • September 26, 2013 at 12:00 am
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    gg california

    Reply
  • March 2, 2014 at 11:48 am
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    It's a good thing the federal government runs things so efficiently or I'd be really upset right now…………

    Reply
  • August 21, 2015 at 8:16 pm
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    amazing video

    Reply
  • January 25, 2016 at 12:53 am
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    In other words, we are 10% poorer. Dam…They took so much yet operated under deficit.

    Reply
  • July 27, 2016 at 10:16 am
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    this is complete bs honestly, im making around 50000k gross income, after fed, social, medical, and state taxes im making 38k a year. it pisses me off. who the fuck am i feeding?

    Reply
  • August 25, 2016 at 9:57 pm
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    So what your saying is…. vote republican if you want to keep your fuckin money.

    Reply
  • December 9, 2016 at 9:30 pm
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    I see a lot of people complaining about the tax code, in general. I believe this anger is misplaced. Let me break this down a little more. Yes, this is a fantastic outline of the tax system that's useful in calculating what your take home pay was for the year. Let's be honest, though. Federal income tax is withheld from your check throughout the year. It's not like you really see this money throughout the year. Let's go even further, though. Many people choose to claim no exemptions through the tax year, maximizing the amount of money withheld to the federal government. This normally results in a gross overpayment in federal taxes throughout the year, leading to a big refund after filing taxes for the year. To be honest, in some cases, people have nobody but themselves to blame for their slimmer paychecks through the year. In fact, many people could claim the maximum exemptions on their W-4 and choose to pay ZERO federal tax through the year…and still receive a refund due to the EITC and standard deduction. In this simple video, Khan shows that a person earning 50K/year pays $9,754.00 in federal taxes through the year, or an effective tax rate of 19.5%. This is, of course, not taking various tax credits and deductions, which can dramatically lower the effective tax rate. Everybody hates taxes, but everybody also thinks that government should provide services. How do you think they pay for them? And before you demonize the government as controlling your life, ask yourself whose commercials are on TV trying to sell you crap you don't need and can't afford. Or who is trying to sell you the car you can't pay for. Or who is trying to sell you the house that's way outside your price range. The private sector controls far more of your life than the government does. Finally, who do you think provides the protections you need so you can live in a society where you won't die at age 30 from the common cold? Your food and drinking water are safe (for the most part…sorry, Flint, MI, for your ignorant legislators), you have police and fire departments, we have national parks, you have a freaking kick-ass military! Where do you think the money comes from? The bottom line is this: governments are accountable to the people…the private sector is accountable only to its shareholders. They care about one thing and one thing only…money. Let the trolling begin…

    Reply
  • January 24, 2017 at 12:51 am
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    ok so I have the fed. taxes and its asking me to fing the adjusted gross income. there is a chart below… with a arrangement of #. I just want to know the formula if you would call it one to finding this out…. thank you in  advance… watched a lot of your podcasts in highschool but now in cmc.

    Reply
  • February 28, 2017 at 7:38 am
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    I'd like to know why scams going on in the state of Florida and there is no personal income tax and we have no state tax we do however have the highest property taxes so why are you taking people's money from there personal income personal income includes everything your salary or wages your winnings the Federal Reserve is a foreign Bank in this is a Ponzi scheme

    Reply
  • March 30, 2017 at 4:51 am
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    SO when you add FICA taxes you almost do pay the actual bracket tax percentage over your income

    Reply
  • April 17, 2017 at 9:01 am
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    Hey Sal can you a video on how pay employee payroll taxes from business owner perspective. How can a employer file employee taxes. And why should employer pay FICA ?

    Reply
  • December 21, 2017 at 4:09 am
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    but keep voting for socialists like bernie so that we can be taxed to oblivion…
    socialism = slavery

    Reply
  • January 11, 2018 at 2:15 pm
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    I understand why not get taxes back this year?

    Reply
  • January 24, 2018 at 12:22 am
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    I'm too old to have just learned this. This should be a required course in High School. Thank you!

    Reply
  • March 12, 2018 at 2:13 am
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    thats a of bags

    Reply
  • July 11, 2018 at 12:28 pm
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    Understanding these concepts help you change your living situation. If you can balance your withholdings and reduce your tax refund, you can increase your monthly budget and get into your first home or into a larger home.

    Reply
  • August 27, 2018 at 12:31 am
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    If anyone is watching this in 2018, there is no longer a personal exemption and standard deduction for individuals is now $12000. And obviously the tax brackets have changed.

    Reply
  • April 7, 2019 at 6:07 pm
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    I’d like to see Pelosi and the goofball in Newyork. The man with all talk and no action.

    Reply
  • June 15, 2019 at 11:27 pm
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    Does fica take tax from your gross even if you make contributions to a 401k?

    Reply
  • August 19, 2019 at 3:30 pm
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    Thank you 😊

    Reply
  • September 13, 2019 at 2:10 pm
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    What about weekly checks?

    Reply

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