Most Americans I know hate declaring their taxes, much less paying them. Calculating the right amount of taxes to the US government is rather difficult and in many cases requires a tax professional’s help or at least some help from tax software.
However, there are times when all you need is a good estimate of the taxes you’ll have to pay on a given salary. For example, when you are offered a new job it is great to know what portion of the salary you can take home every month to pay for living expenses or save to become financially independent and retire early. Especially graduating students encounter this situation with their first job, but also anyone who switches careers or moves across the country for a new job.
In this article, we’ll calculate estimates for a salary of 40,000 dollars a year for a taxpayer filing single. We also have an article for 40 thousand dollars of combined earned income after taxes, when declaring the filing status as married filing jointly.
- $2,480 in social security tax
- $580 in medicare tax
- $3,095 in federal tax
- Between $0 and $879 in state and local taxes
After paying all these taxes you will have a net income between $32,966 and $33,845 per year depending on which state or locality you live in or pay taxes in. This calculates to the monthly take-home pay of $2,747 – $2,820
- What taxes do I need to pay on earned income?
- How much federal taxes do you pay filing single on a $40K salary?
- How much State and Local Income Taxes do I owe (filing single)?
- As a single, what is my monthly take-home pay on 40,000 dollars income?
- On 40,000 dollar income, what is my marginal tax rate?
- Further Reading
- Disclaimer – Taxes vary based on individual circumstances
What taxes do I need to pay on earned income?
Earned income is the money an employer pays you as hourly wages or as a monthly salary. On that, the federal government collects income tax. Further, the federal government collects Social Security tax and Medicare tax.
Some states and even counties or cities have their own tax schedule on earned income. If you live in one of these states or cities, you might have to pay all of the taxes below on the income an employer pays you.
- Social security
- Federal income tax
- State income tax
- Local income tax
There are other forms of income such as capital gains, dividends, or business profit, which have different rules of taxation. We will not cover these types of income here.
How much federal taxes do you pay filing single on a $40K salary?
Your employer will deduct different amounts of taxes from your gross income before he sends you the remainder every month. The employer will have to send federal and state tax to the IRS, as well as social security and medicare taxes.
Social Security and Medicare?
Social Security and Medicare together are often called FICA taxes. FICA is the abbreviation of the Federal Insurance Contributions Act. The act establishes that these taxes are deducted by the employer from your paycheck.
Social Security is paid to ensure you will have social security benefits when retiring from work and will not be poor after a lifetime of labor. The current rate in 2022 is 6.2% on the first $147,000 of income. The employer will contribute the same amount in addition to what is deducted from your paycheck.
Medicare tax is paid to ensure you have health insurance in retirement or when you become unable to work due to disability. The current rate is 1.45% of the full gross wages in 2022. The employer contributes the same amount to medicare.
On a $40K annual income, you pay $8,680 for social security and $2030 for medicare. So the FICA taxes amount to $10,710 of your annual income. That is ~$893 of your monthly paycheck.
Federal Income Tax (filing single)
Federal income tax on earned income is calculated on the taxable income. This means you can subtract tax deductions from your gross income. For simplicity, we use the standard deduction of $12,550 here. The standard tax deduction is applied if you don’t document all deductions you can take. If you itemize your deductions, you need to estimate these for the current tax year and use a calculator for a more detailed calculation.
Dollar amounts above the standard deduction are taxed at different rates. The first $9,950 are taxed with 10%, the next $30,575 with 12%. There are further tax brackets with rates of 22%, 24%, 32%, 35%, and 37%.
You will have to pay $3,095 in federal income tax as a single filer on earned income of $40,000 a year.
How much State and Local Income Taxes do I owe (filing single)?
Some states have no state income tax. However, other states and even some counties and cities levy additional tax on earned income. The system of taxable income after deductions and tax brackets is similar in most states. Just each state has its tax brackets and tax rates per bracket.
As a taxpayer filing single you have to pay the following amounts in different states:
|State||Highest Rate||Income Tax|
|Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington state, and Wyoming||0%||–|
|Kentucky, Massachusetts, Alabama, Mississippi, Oklahoma||5.00%|
|Georgia, Maryland, Virginia||5.75%|
|Arkansas, New Mexico||5.90%|
So you pay between $0 and $879 in state income taxes.
As a single, what is my monthly take-home pay on 40,000 dollars income?
On a gross earned income of $3,333 monthly, you’ll pay about
|Tax on 3,333 dollars / month||Amount||Remaining Amount|
|Gross monthly income||$3,333.00|
|Social Security||– $206.67||$3,126.67|
|Federal Income Tax||– $257.91||$2,820.43|
|State Income Tax||– $0 to $73.25||$2,747.00 to $2,820.00|
Your monthly income after taxes will be between $2,747 – $2,820.
Your actual monthly paycheck can still be lower, because you may pay your portion of the health insurance premium or other insurances your employer offers, such as dental insurance or vision insurance. You may further elect to pay money into tax-advantaged savings accounts, such as 401(k) retirement savings, health savings accounts (HSA), or 529 college savings.
These further deductions are up to your budgeting decisions.
What is my net pay bi-weekly and my net hourly rate?
If your employer pays you bi-weekly, your net pay should be the annual after-tax payment divided by 25 because there are typically 25 bi-weekly paychecks per year. This will be $3.805 to $4,187 per bi-weekly paycheck.
Another interesting calculation is the net pay rate per hour. You can use the net hourly pay rate to express the purchase price of a product or service in hours you need to work to afford an item. Calculating the hours of work for purchases makes the price of an item more personal and it helps to reduce unnecessary expenses. For example, if you live in California, earning 40,000 you’d have a net pay rate of $16/hr.
At a net hourly rate of $16, you will have to work 50 hours to purchase a new TV for $2,400. You can also calculate that you will work 8.75 minutes for a $7 Mocha Latte on your way to work. If you do this five days a week you’ll work ~ 45 minutes a week just for this treat.
On 40,000 dollar income, what is my marginal tax rate?
The marginal tax rate is the rate at which you pay taxes for any additional income. If you would earn one more dollar, which portion would you pay in taxes, and how much would be your take-home income?
With 40,000 of income and filing as a single, your highest federal tax bracket is 24%. However, you also pay FICA taxes and state tax on the additional income. So in a state with zero income tax your marginal tax rate is 24% + 6.2% + 1.45% = 31.65%
At an income level of 40 thousand dollars a year you owe a substantial portion of your income to the government in form of taxes. Some of this is credited to you personally such as social security or medicare, two national insurances to keep you from falling into poverty. We pay the rest of the taxes for all the things the government does for us.
When earning a salary of $40,000 a year you will have a net income of $33,845 a year after federal taxes. This comes to a monthly net income of $2,820.
Depending on the state you live or work in, you may pay additional state income taxes, which can reduce your monthly paycheck further to a minimum of $2,747.
You can use this as estimated income in a budget if you also enter costs of employer-subsidized health or other medical insurance as expenses. You should also account for any tax-advantaged savings into 401(k) or other plans in your budget. These can reduce your monthly check with which you have to cover your housing and living expenses.
Paying taxes reduces your free income of $20/hour pay rate to $16/hr if you pay the highest income taxes in California. Use that $16/hr rate to calculate how many hours you need to work to purchase any non-essential item or service. This makes a purchase more personal in value, which helps you to keep your budget. It prevents you from overspending.
Do you want to play it save and calculate rounded down: "Making 39,000 dollars annually, how much is that after taxes?"
Expecting to make a little extra income? We calculated "how much is $41,000 yearly after taxes?" for you.
Getting a bigger pay raise? Find out how much you can take home from 50,000 dollars gross income.
Do you consider that job offer in your favorite city, even as it pays less? Money is not everything, find out what you’ll earn after taxes on a gross salary of $30,000 per year.
Disclaimer – Taxes vary based on individual circumstances
This is not tax advice, nor should be taken as such. All calculations are estimates and for budgeting purposes only. The content of this article is for learning and entertainment, it does not replace professional tax advice. We used data for the tax year 2022.
In general, you have to consider your personal circumstances. Your taxes may vary depending on filing status, the number of dependents, itemized tax deductions, other types of income, and many other factors. To prepare your tax return you should consult with a tax professional. A CPA or other tax professional can also give you advice on how to lower your taxes.
If you are interested in calculating your monthly take-home pay the same way human resources at your employer does, you can consult the official IRS tax withholding estimator.