(((Adjusted Gross Wages for this Paycheck × # of Pay Periods per Year) - Exemptions - State tax threshold amount of untaxed income) × Tax rate from State Tax table) ÷ # of Pay Periods per Year = State Tax Withholding for this Paycheck
See the following example for a married employee with 0 exemptions subject to state tax in Colorado who is paid monthly for the calendar year 2013.
$1,146.24 <- Employee's Adjusted Gross Wages this paycheck.
× 12 pay periods in year
= $13,754.88 <- Predicted annual earnings (assumes that the paychecks will be the same).
- $0.00 <- No exceptions for this employee.
- $7,900.00 <- Married threshold before the CO state % kicks in, or untaxed income, as pulled from State Tax table.
= $5,854.88 <- Predicted annual taxable income for CO state.
× 0.0463 <- CO tax rate for married income above $7,900.00 is 4.6300%, as pulled from State Tax table.
= $271.08 <- Predicted total CO state tax for year.
÷ 12 pay periods
= $22.59 <- State tax withholding for this paycheck.