2-2 Computing State Income Tax

In addition to federal taxes, most states require a specified amount to be withheld from your paycheck for state income tax purposes. This amount might be a certain percentage of your taxable wages, which depends on the number of personal exemptions (or withholding allowances) you claim to support your family.

Taxable Wages = Annual Gross Pay – Personal Exemptions
Annual Tax Withheld = Taxable Wages x Tax Rate

Example

Find the state income tax withheld.
Martin Tabor’s gross pay for the year is $28,500. The state income tax rate is 3.5 percent. If Tabor takes a single exemption for himself, how much is withheld from his yearly earnings for state income tax? Use the Personal Exemptions table on page 175.

  1. Find his taxable wages.
    Annual Gross Pay – Personal Exemptions
    $28,500 – $2,000 = $26,500
  2. Find the tax withheld.
    Taxable Wages x Tax Rate
    $26,500 x .035 = $927.50

Practice

Find the annual state income tax withheld.

  1. Gross pay: $38,550; married, 2 dependents; state income tax rate: 3 percent.
  2. Gross pay: $47,425; married, zero dependents; state income tax rate: 4.25 percent.
  3. Gross pay: $24,872; single, zero dependents; state income tax rate: 3.75 percent.
  4. Gross pay: $29,149; single, one dependent; state income tax rate: 2.95 percent.

Use the Personal Exemptions table on page 175 to answer the following questions:

5. Clayton McGrath earns $23,000 per year. He is married with 2 dependents, and his state income tax rate is 2.75 percent. What are his personal exemptions? How much is withheld per year for state income tax?

6. Maggie Cook earns $26,500 annually. She is single with 3 dependents, and her state tax rate is 3.5 percent. What are her personal exemptions? How much is withheld per year for state income tax?

7. Standardized Test Practice: Lawanda Shelbold is a registered nurse with an annual salary of $32,000. She is married, has 1 child, and claims 3 withholding allowances. If the state tax rate is 3.5 percent, how much is withheld annually from her gross pay for federal and state income tax?
A. $980       B. $2,834      C. $2,366      D. $1,456

 

(source) – edited for correctness