How Much Tax Is Taken Out of My Paycheck in Nebraska?

Paycheck withholding is the process where employers deduct a portion of an individual’s income to collect estimated tax obligations throughout the year. This system ensures tax liabilities are met gradually, rather than requiring a single large payment at year-end.

Federal Income Tax Withholding

Federal income tax is a mandatory deduction from an employee’s gross wages. This withholding operates under a “pay-as-you-go” system, where taxes are remitted to the Internal Revenue Service (IRS) as income is earned. The amount withheld depends on an individual’s earnings and the information provided on Form W-4, the Employee’s Withholding Certificate.

Employers use Form W-4 details, such as filing status and any adjustments, to determine the appropriate federal income tax amount to deduct. This form helps employers estimate tax liability and send the correct amount to the IRS. While federal income tax is structured with various tax brackets, the specific rates are applied based on taxable income, influencing the amount withheld throughout the year. An accurate W-4 helps align withheld amounts with the actual tax owed, preventing significant overpayments or underpayments at tax time.

Nebraska State Income Tax Withholding

Nebraska has its own state income tax, withheld from employee paychecks. This state tax operates on a graduated system, meaning the tax rate increases as an individual’s taxable income rises. For 2024, Nebraska’s income tax rates range from 2.46% to 5.84% across four tax brackets, with the specific rate depending on filing status and income level.

To determine state withholding, employees complete a Nebraska Form W-4N, the Nebraska Withholding Allowance Certificate. This form accounts for differences between federal and state tax laws, such as standard deductions and personal exemption credits. Employers use W-4N information, in conjunction with the Nebraska Circular EN, to calculate the appropriate state income tax deduction.

Other Mandatory Payroll Deductions

Beyond federal and state income taxes, paychecks include other mandatory deductions that fund specific government programs. These are Federal Insurance Contributions Act (FICA) taxes, which cover Social Security and Medicare taxes.

Social Security taxes contribute to a federal program providing retirement, disability, and survivor benefits. For employees, the Social Security tax rate is 6.2% of gross wages, up to an annual wage base limit, with employers contributing an equal share. Medicare taxes fund healthcare benefits for eligible individuals, including those aged 65 or older and certain people with disabilities. The Medicare tax rate for employees is 1.45% of all gross wages, with no wage base limit, and employers also contribute an additional 1.45%.

Factors Influencing Your Withholding Amount

Several factors affect the amount of taxes withheld from an individual’s paycheck. The information provided on the federal Form W-4 and the Nebraska Form W-4N plays a significant role in this calculation. Filing status, such as single, married filing jointly, or head of household, influences the tax brackets and standard deductions applied.

The number of dependents claimed on these forms also impacts the withholding, as it can account for potential tax credits like the Child Tax Credit. Employees can also elect to have an additional amount of tax withheld from each paycheck, which can be useful for those with multiple jobs or other income sources not subject to withholding. An individual’s gross income level and the frequency of pay, such as weekly or bi-weekly, influence the per-pay-period withholding amount.

Understanding Your Pay Stub and W-2

A pay stub provides a breakdown of an employee’s earnings and all deductions for a specific pay period. On a pay stub, federal income tax withholding may appear under abbreviations like “FIT,” “Fed Tax,” or “FWT.” State income tax deductions, such as those for Nebraska, are often labeled as “SIT” or “NE Tax.”

Social Security taxes are commonly abbreviated as “SS” or “OASDI,” while Medicare taxes may be shown as “Med” or “HI.” At the end of each calendar year, employers issue Form W-2, the Wage and Tax Statement, which summarizes annual wages and all federal, state, and FICA taxes withheld. Employees use this W-2 form to file their annual federal and state income tax returns.