5. Identify state income tax deductions

The great majority of states collect their own income tax. This is in addition to the federal income tax.

Some states use a “graduated” tax rate like the federal government, meaning that people with higher incomes pay a higher percentage. Other states use a “flat” tax, meaning that everyone pays the same percentage.

Your state income tax may be identified on your paycheck with an abbreviation for the name of the state: TN, for example, for Tennessee.

Calculating state income tax:

• Assume you earn $615.38 in gross pay per week and your state has a flat tax of 3%. How much would your employer deduct from each paycheck?
• Multiply $615.38 by 3%, or .03:
  $615.38 × .03 = $18.46