Do my withholdings sound correct?

[ScrimpAndSave]

I am a teacher. I gross about $45,000 a year...but I find that my biweekly take home is so little. Whats up with that?

Here is a sample paycheck (which is the same biweekly):

Total Pay: $1,741.16 (Gross)

Blue Cross Deduction: $25.00
Retire at 7 1/2% ACT 9: $130.59 (Pension)
Medicare Tax: $24.88
Social Security Tax: $106.40
Supp. Enemploy. Ins.: $1.04
PA State Tax: $52.69
Federal Witholding Tax: $168.49
Township Tax: $17.16
Federal Witholding 25%: $0 (although it says $83.24 for the calendar year)
Teacher's Union Dues: $31.40
Local SVSCS Tax: $2.00
Union Pace Program: $25 (discontinuing in October- it's a donation)

Total Deductions: $1,409.65

NET: $1156.51


So if I am looking at how much PITI I can afford if looking at mortgages...do I take 28% o $1156.51 or 28% of $1741.16? Or neither?

Confused.

[ScrimpAndSave]

And by the way...I have 26 pays a year. When tax time comes around...I usually get around $300-$500 back.

[ScrimpAndSave]

And just a quick overview of where the $1156.51 goes:

$800 INDirect (Savings for House and Wedding)
$ 25 Credit Union Savings (Fiance graduates in May and I want to throw him a surprise graduation party)
$200 Rent (Live with my dad...but give him $200 per pay in rent)
$ 50 Fun
$61.51 Food
$15.00 Gym Membership
$ 5 PETA donation
The $200 that I give my dad covers my car insurance ($600 a year) and my cell phone bill. My car is paid off...anything that is left over (if I don't use all the food and fun money) goes into the ING account.

[noppenbd]

Withholdings look ok to me, nothing stands out. I usually estimate take-home to be about 66-70 percent of gross as a rule of thumb, so you are in that ballpark.

The normal guideline for mortgage lending is 28% of gross, so $1056 monthly payment for you. This is PITI+escrow (including prop taxes, prop insurance, PMI, HOA). This is a maximum, not necessarily the target you want to shoot for. Only you can tell (by looking at your other expenses) if you can afford the payment. Don't rely on the bank's lending guidelines alone.

[MonkeyMama]

Not sure I have an answer for you, but this is a very good question.

The reason so much is withheld is because you are a teacher. There is a lot of money being withheld for pension, benefits, union, etc., etc.

You are having $584 withheld EVERY paycheck. (33%)

$215 of that is for all of the above. (13%)

Only $369 of that is taxes. (20%)

So, your tax withholdings look right on (considering your minimal refunds).

I get to keep 85% of my paycheck because my taxes are lower and nothing is withheld, but taxes. (Though I have private health insurance, so the grass is not always greener). So I did do a double take when I looked at all those withholdings... (My gross is about 70% more than yours).

Which leads me to your question. I am not sure the rule of thumb is as important as what is comfortable to you. The "rule of thumb" is something like 28% gross (and no more) to a mortgage payment. But you may not feel comfortable with that, with so many deductions coming out of your check. You may feel more comfortable going with 28% of net, or 35% of net. You would probably know best what you can afford.

You may want to consider 28% of "gross minus non-tax deductions"?

Owning a home could also significantly lower your tax withholdings. So keep that in mind as well.

[project15]

I get $1800 gross per paycheck and get about $1360 after taxes/insurance/retirement is taken out. I'm also not a teacher, so that's where your extra $200 goes to as calculated by MonkeyMama

[project15]

That 28% rule of thumb would be for gross, but as always, the cheaper the better!

[maat55]

Originally Posted by ScrimpAndSave

I am a teacher. I gross about $45,000 a year...but I find that my biweekly take home is so little. Whats up with that?

Here is a sample paycheck (which is the same biweekly):

Total Pay: $1,741.16 (Gross)

Blue Cross Deduction: $25.00
Retire at 7 1/2% ACT 9: $130.59 (Pension)
Medicare Tax: $24.88
Social Security Tax: $106.40
Supp. Enemploy. Ins.: $1.04
PA State Tax: $52.69
Federal Witholding Tax: $168.49
Township Tax: $17.16
Federal Witholding 25%: $0 (although it says $83.24 for the calendar year)
Teacher's Union Dues: $31.40
Local SVSCS Tax: $2.00
Union Pace Program: $25 (discontinuing in October- it's a donation)

Total Deductions: $1,409.65

NET: $1156.51


So if I am looking at how much PITI I can afford if looking at mortgages...do I take 28% o $1156.51 or 28% of $1741.16? Or neither?

Confused.

Your house should be no more than 28% of your take home pay, but that could be based before your retirement is taken out. Or at 36% of your debt service. Debt service is CC payments, car payments, HEL's etc. Your payment should be with taxes and ins. around 800.00 based on your numbers. Or close to 1000 if your debt free, but you still have to save for cars and others, I would stay with the 800.00.

[ScrimpAndSave]

I have about $1000 in debt at the moment. I go from being debt free...to having $800-$1000 in cc debt. Basically I rack it up and then pay it off in a lump sum usually...so it never feels out of control..and I pretty much consider myself to be without any debt.

My car is paid off...it is a 2001 Honda Accord...doing very well (knock on computer).

[ScrimpAndSave]

I gross $50,000 starting in mid august...do I still need to consider a mortgage that is $800-$1000 per month? (with PITI)