How to Calculate State Tax From a Pay Check

by Grace Ferguson, studioD

The states of Florida, Alaska, Nevada, South Dakota, New Hampshire, Texas, Tennessee, Washington and Wyoming do not require an employer to withhold state income tax from employees’ paychecks. In other states, an employer must use the state department of revenue’s guidelines to calculate employees’ state tax. Like federal withholding laws, state withholding policies are susceptible to change. To ensure proper withholding, apply the rules that correspond to the tax year you’re computing.

Obtain withholding procedures from the state revenue agency. Some states use a withholding system that is similar to federal income tax withholding, except that you use the state withholding tax tables instead of IRS Circular E’s federal withholding tables. The state might also require employees to fill out a withholding form that is similar to the federal form (W-4), except that the state form is specifically designed for state income tax withholding. Some states allow an employer to use the employee’s W-4 for state income tax purposes.

Determine the employee’s gross pay, which is all of her income for the pay period before deductions.

Contact the state revenue agency to determine if you must include pretax deductions, such as section 125 health plans and 401k contributions, in employees’ taxable wages. If not, subtract the benefit from the employee’s gross pay to arrive at wages that are subject to state income tax.

Calculate state income tax according to state rules. For example, as of the time of publication, use the employee’s IT-2104 form and Publication NYS-50-T-NYS to figure New York State income tax; apply the tax table that matches the employee’s taxable wages, pay frequency, and the filing status and exemptions he claims on his IT-2104. For employees who work and live in Pennsylvania, withhold state income tax at 3.07 percent of taxable wages, as of the time of publication


  • If an employee’s work state has a reciprocity agreement with another state, it means that you do not withhold state income tax according to the employee’s work state. In this case, withhold state income tax based on the employee’s resident state.
  • If local income tax applies, consult your state revenue agency or local tax assessor for withholding guidelines.

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

Photo Credits

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