Do you know what take-home pay is? It’s how much money you make each month after taxes, benefits and other contributions are taken out of your paycheck. So there are two numbers to consider when you get a new job. The first is how much your job promises you; that’s the salary they give you. The second is how much you actually receive every week. Of course, take-home pay varies depending on what state you work in. Some states don’t have to pay income taxes, and in others, you lose a large amount of your check when that specific state collects its income tax. I’m going to break it down for you.
Difference between California and Florida
Let’s take Donna in Los Angeles and Joey in Miami. They both make $50,000 a year. But every month on payday, Joey takes home $3,357. Donna gets $3,166. (If you’re counting, that’s almost $200 more for Joey.) By the end of the year, Donna makes $37,000, and Joey makes $40,000. Why is this? Well, in Florida, Joey doesn’t have to pay state income tax, and neither do his friends in Alaska, Nevada, Tennessee, Texas, Washington, Wyoming or New Hampshire.
How local taxes add up
Now let’s take another example. Carmen in New York City makes $50,000 a year, but her take-home is even less than Donna’s. That’s because Carmen has to pay income tax on the local level: city tax. When it’s time to collect her paycheck, Carmen only gets $3,007. Yikes. Other states with local taxes included Alabama, Arkansas, Colorado, Delaware, Indiana, Ohio, Kentucky, Maryland, Michigan, Missouri, New Jersey, Ohio, Oregon and Pennsylvania.
Do your research when looking for a job
As you can see, there’s a big difference between living in a state with no income tax and a state with an income tax. Plus in some cases, you even have to consider the city where you’re working or living. So when accepting a job, do all of your research because where you work could take a big bite out of your paycheck. Will you be a Donna, Joey or Carmen?
Check out this salary paycheck calculator from ADP.
For info on New York taxes, check this out.