Payroll Deduction
Navigating Payroll Deductions: A Comprehensive Guide
Understanding Federal Income Tax: Federal income tax applies to various sources of income, including salaries, bonuses, tips, and more. Exceptions exist for low-income earners.
State and Local Income Tax: Deductions vary by state, with some, like Alaska and Florida, having no income tax. New Hampshire and Tennessee tax investment income.
State Unemployment Insurance: Limited to Alaska, New Jersey, and Pennsylvania, state unemployment insurance safeguards workers during periods of unemployment.
Court-Ordered Garnishments: Mandatory deductions to settle debts, such as child support, taxes, student loans, alimony, and fines.
Social Security and Medicare: Mandatory contributions based on income—6.2% for Social Security and 1.45% for Medicare.
Voluntary Payroll Deductions: While not mandatory, employers often facilitate voluntary deductions, including health, life, and disability insurance, union dues, and contributions to retirement or savings accounts.