How to Calculate Federal Withholding Tax

Employers are required by federal law to withhold a certain amount of money from your paycheck, based upon the information provided on Form W-4, the Employee's Withholding Allowance Certificate. About midway through the year, you should calculate federal withholding tax and compare that to the amount of money being withheld each pay period. If too much or little is being withheld, you can submit a new Form W-4 to your employer that will change the amount being withheld for the remainder of the year.


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    Estimate your adjusted gross income (AGI) for the year after pre-tax deductions.
    • Look at a recent pay stub and subtract pre-tax deductions, such as employer health insurance plans and retirement plans, from your gross wages for the pay period.
    • If you are paid monthly, multiply by 12 to get your annual income. If you are paid more frequently, do the necessary calculation.
    • Add anticipated commission or bonus, minus pre-tax deductions.
    • Add investment income, net gains from asset sales, net rental income, and taxable retirement income, if applicable. Use amounts from last year's tax return to help you estimate these income amounts.
    • Subtract losses from asset sales and allowable deductions (as listed on page 1 of Form 1040) to arrive at your AGI.
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    Repeat the previous step for your spouse, if applicable, and add your spouse's AGI to your AGI to determine your total income for the year.
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    Deduct either the allowable standard deduction (Form 1040-ES shows the amount based on your filing status), or the total of itemized deductions from your AGI.
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    Determine the total amount of your exemptions.
    • Look up the current value for each qualified dependent in the Form 1040-ES instructions.
    • Multiply that value by your number of exemptions and subtract the amount to get your total taxable income.
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    Look up your federal income tax, based upon your taxable income for the year and filing status (married, single, head of household, or widow/widower) in the current Federal Tax Table.
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    Subtract child/dependent care credits, child tax credits, and other credits and other credits that apply to get your annual federal withholding tax.
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    Divide your annual federal withholding tax by your number of pay periods for the year. For example, if you are paid monthly, divide by 12.
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    Compare your federal withholding tax for each pay period to the amount currently being withheld on your pay stub.
    • If you are having too much withheld, you can claim more exemptions on IRS Form W-4.
    • If you aren't having enough withheld, you can change your filing status from married to single and/or claim fewer exemptions on the Form W-4.


  • The IRS Withholding Calculator on the IRS website is a tool you can use to calculate federal withholding tax.

Things You'll Need

  • Most recent paystub
  • Most recent income tax return
  • Current Federal Tax Table

Article Info

Categories: Taxes and Fees