A lot of workers are about to get a pleasant surprise in their February paychecks — more money!
New tax law means more take-home pay for most
On Jan. 11, the IRS issued new guidelines based on the GOP tax law to help companies calculate your paycheck correctly in 2018.
While the compliance deadline of Feb. 15 still looms ahead for employers, many businesses have already taken the latter half of January to process the new info and put it into action.
We’re starting to see the results of the new 2018 withholding tables designed to tell your payroll department how much money to hold out of your paycheck each week based on your filing status.
And for many Americans, that means their February paychecks already are or soon will be fatter!
In fact, the IRS says about 90% of workers will see an increase in their take-home pay beginning this month as a result of the new tax law.
This is how much more you could see in your paycheck
Per the IRS, here’s the new rule of thumb: For single employees who make between $509 and $1,631 every two weeks, employers should withhold $36.70 plus 12% of every dollar over $509.
Business Insider crunched the numbers and found out how this would look for an employee who earns $1,000 gross every two weeks.
(That’s between roughly $11 to $12 an hour, in case you’re wondering.)
Under the new law, the employer would withhold $95.62 from each paycheck for taxes — with adjustments based on several factors and allowances.
So that means a net take-home paycheck of $904.38.
Here’s an overview of the new withholding tables to give you an idea of what to expect based on your annual income:
Use that extra money to give yourself a raise in retirement
So what are you going to do with the extra money in your paycheck? Consider giving yourself another raise of a different kind.
Picking up the full employer match if you have a retirement plan like a 401(k) at work is a smart move. It’s the equivalent of giving yourself an automatic pay raise in retirement — except there’s no need to ask your boss, get a good quarterly review or hope your company has a good year so you can get that raise!
So if you’re not already picking up the full company match, this would be a great time to change your contribution rate either through your retirement plan’s administrator or directly with your employer.
Don’t be intimidated by the whole process. Our investment guide will walk you through the process of saving for your future.
Remember, if you don’t save for retirement, it won’t get done and you’ll have to keep working!