Federal Income Tax

• Federal income tax withholding percentage depends on the employee's situation. To figure the percentage of federal income tax to be withheld from a paycheck, the employer uses the employee's W-4 form and the IRS Circular E's withholding tax tables. Specifically, it subtracts the employee's total sum allowed for all the allowances she claims on line 5 of her W-4 from her gross wages. Thereafter, the employer uses the Circular E's percentage tax bracket that matches the employee's pay after allowances, and her filing status and pay period, to figure federal income tax withholding. The percentage tax brackets for 2011 were 10 percent, 15 percent, 25 percent, 28 percent and 35 percent.
  
  

FICA Taxes

• Social Security and Medicare taxes, also called FICA taxes, are withheld at flat percentages of an employee's gross pay. In 2011, the employer withheld Social Security tax at 4.2 percent of an employee's gross wages, up to $106,800 for the year, and Medicare tax at 1.45 percent of all his gross wages.
  
  

State Income Tax

• The percentage of withheld state income tax depends on the withholding system the state uses; this varies by state. For example, in 2011, Pennsylvania employers calculate state income tax at 3.07 percent of gross compensation. But in Georgia, an employer can use either the wage bracket method, which gives the exact flat amount to withhold based on the employee's filing status, wages, allowances and pay period, or the percentage method, which is based on a percentage of the employee's pay after her standard deduction and personal allowance are subtracted from her gross pay.
  
  

Local Taxes

• Some cities and counties charge local income taxes to residents -- and in some cases, nonresidents -- who work in the taxing jurisdiction. The withholding method varies by locality. For example, for Ohio school district tax based on earned income, the employer withholds at the decimal rate or percentage associated with the school district in which the employee resides.