Most people are shocked beyond belief when they get their first paycheck. They don't know anything about a net take home pay calculator. They worked a certain number of hours, and they were getting a certain pay per hour. They could do the math in their heads easy enough Military pay calculator. They were maybe looking forward to buying something nice for themselves or a loved one.
Imagine their horrific shock when their actual take home pay was significantly less than they'd expected. This is a very common occurrence. What's more, there's plenty of different stuff taken out. And some of it is downright confusing. The truth is that there are tons and tons of tax laws which are changing every year which have a direct and significant impact on your take home pay. And unless you understand how the system works, you'll always be at a loss.
First of all, different people have different tax schedules, or tax rates. This is based on the amount of income you make. Generally speaking, the tax is a progressive tax. That means that the more you make, the higher of a percentage you'll pay. Seems straightforward, right? Well, it gets more complicated.
If taxes were only based on your income level, and the percent you had to pay in taxes, then figuring out how much you were going to get come payday would be easy. Not so fast.
There's a difference between, "gross income," and "taxable income." Gross income is how much you actually make. Taxable income is what the government bases their taxes from. There are plenty of things you can subtract from your gross income to give you a lower taxable income. For most people, the name of the game is to find and use as many of these as possible, so you can minimize your tax exposure.
One thing everybody gets is something called a "Personal Allowance." This is subtracted from your gross income right off the bat. The more people you are supporting, the more of these personal allowances you get. Also, different people get different allows. These are both the people who are working and paying the taxes, and the people who are being supported by the people working and paying the taxes.
Your personal allowance also changes if you are single or married. It also depends on how old you are. It also depends on whether or not you're blind.
Confused yet? If you ever get a bonus, this will be taxed at a rate differently than your regular rate. If you work overtime, this could move you up into a higher tax bracket, which means they'll take a bigger percentage. This is important to know, because working those extra hours won't necessarily give you a lot of extra money when payday rolls around. It's important to know where the limits are.
