Lesson Objective Compute state taxes on a straight percent basis.

Most states require employers to withhold a certain amount of pay for state income tax. Each state may calculate this differently, but in the state of Pennsylvania, your state income tax is calculated using your Gross Pay and 3.07%.

Tax rates of the 50 states

Lesson 2.2 State Income (Withholding) Tax

State Income (Withholding) Tax– The percentage deducted from an individual’s paycheck to assist in funding

government agencies within the state– The percentage deducted depends on the amount of gross pay earned

Pay Period 6/11/2004-7/11/2004$1,502.10$250.35Totals

$503.46$117.72$636.00$244.92$0.00$0.00

$106.00$40.82$83.91$19.62$0.00$0.00

Federal WithholdingState WithholdingFed OASDI/ EE or Social SecurityFed MED/ EE or MedicareMedical401K

$1,353.33

Year-to-dateCurrentDeductionsPay Type-Gross Pay

Employee Address293 Michael GroveBillings, MT 59102

Check Amount$1,102.98

Check #164

SSN201-92-4856

EmployeeBeakens, Joe

On-The-Go

Pay Period 6/11/2004-7/11/2004$1,502.10$250.35Totals

$503.46$117.72$636.00$244.92$0.00$0.00

$106.00$40.82$83.91$19.62$0.00$0.00

Federal WithholdingState WithholdingFed OASDI/ EE or Social SecurityFed MED/ EE or MedicareMedical401K

$1,353.33

Year-to-dateCurrentDeductionsPay Type-Gross Pay

Employee Address293 Michael GroveBillings, MT 59102

Check Amount$1,102.98

Check #164

SSN201-92-4856

EmployeeBeakens, Joe

On-The-Go

State Calculations

State Income Tax = Taxable wages x Tax RateCheck stub for accuracy:

State Tax / Gross Pay = % Rate

$40.82 / $1353.33 = .03016 = 3.02%What is PA’s State tax rate?

Example 1

• Patricia’s gross pay is $65,800 per year. She lives in PA. How much is withheld from her gross earnings for state income tax each month?

• $65,800 x .0307 = 2020.06 (per year)

• $2020.06 ÷ 12 = $168.34 rounded (per month)

Example 2 (on your own)

Jack earns $43,500 per year in PA. How much is withheld from his gross earnings for state income tax each week?

43,500 x .0307 = $1335.45 (per year)

$1,335.45 ÷ 52 = $25.68 (weekly)

Closure: What is state tax money used for?

Calculate the state withholding for Jim:

He made $1200 in gross wages last week. What was his PA state withholding?Answer: 36.84

Summarize main point: why, PA state tax rate? How is this collected?

Assessment

• Gross wages 50,000 for the year. What amount of PA state tax should be withheld?

• Answer

• 50,000 x .0307 = 1535

Homework

• Complete handout on payroll deductions and study for percentage quiz