How to Calculate Your Paycheck After Taxes
Receiving a job offer is exciting. Then you look at your first paycheck and realize the actual deposit is significantly less than your agreed salary. Understanding exactly what is deducted and why helps you budget accurately, negotiate compensation more effectively, and make better decisions about retirement contributions and benefits enrollment.
Gross pay vs. net pay
Gross pay is your total earnings before any deductions. If you earn a $60,000 annual salary paid bi-weekly, your gross pay per check is $60,000 / 26 = $2,307.69.
Net pay (take-home pay) is what you actually receive after all deductions. For a typical single earner in a mid-tax state, net pay is roughly 70 to 75 percent of gross pay. The gap is filled by mandatory taxes and optional benefits.
Federal income tax: how the brackets work
The US federal income tax uses a progressive bracket system for 2026. You only pay the higher rate on income that falls above each threshold, not on your entire income.
| Rate | Single filer taxable income | Married filing jointly |
|---|---|---|
| 10% | $0 to $11,600 | $0 to $23,200 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 |
| 37% | Over $609,350 | Over $731,200 |
Taxable income is gross income minus your standard deduction ($14,600 for single filers in 2026) minus any pre-tax benefit deductions such as 401(k) contributions and health insurance premiums.
FICA taxes: Social Security and Medicare
FICA taxes are separate from income tax and are not affected by your W-4 withholding elections.
- Social Security: 6.2% of gross wages, up to the 2026 wage base of $176,100. Once you exceed this annual limit, no further Social Security tax is withheld for that year.
- Medicare: 1.45% on all wages with no cap. An additional 0.9% applies to wages above $200,000 (single) or $250,000 (married filing jointly).
Your employer matches both the Social Security and Medicare portions, which is why FICA is sometimes called a "payroll tax split" between employee and employer.
State income tax
State tax varies dramatically by location. Nine states have no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Others range from a flat 3 to 4% to California's top rate of 13.3%. Use a state-specific paycheck calculator to factor in your exact state's rules.
Pre-tax deductions that reduce your tax bill
Several common workplace deductions come out before taxes are calculated, which reduces your taxable income:
- 401(k) / 403(b) contributions: Up to $23,500 in 2026 ($31,000 if you are 50 or older). Every dollar you contribute reduces your federal taxable income by one dollar.
- Health insurance premiums: Employer-sponsored health, dental, and vision premiums paid through payroll deduction are typically pre-tax under a Section 125 cafeteria plan.
- Health Savings Account (HSA): If you have a high-deductible health plan, HSA contributions are fully pre-tax (up to $4,150 for individuals and $8,300 for families in 2026).
- Flexible Spending Account (FSA): Up to $3,200 per year for healthcare FSAs, also pre-tax.
A worked example
Single employee, $65,000 gross salary, bi-weekly pay, one 401(k) contribution of 5% ($3,250/year), employer-sponsored health insurance premium of $150/month.
- Gross per check: $65,000 / 26 = $2,500.00
- Less 401(k): $3,250 / 26 = $125.00
- Less health insurance: $150 / 2 = $75.00 (monthly premium split across two checks)
- Federal taxable wages per check: $2,500 - $125 - $75 = $2,300
- Federal income tax withheld (approximate, after standard deduction annualized): ~$200
- Social Security (6.2%): $155.00
- Medicare (1.45%): $36.25
- State tax (varies): ~$80 (assume 5% effective rate)
- Estimated net check: ~$1,953
Frequently asked questions
What is the difference between gross pay and net pay?
Gross pay is your total earnings before any deductions. Net pay is what you actually receive after federal income tax, state income tax, Social Security, Medicare, and other deductions such as health insurance or 401(k) contributions have been subtracted.
How much federal tax will be taken out of my paycheck?
Federal income tax uses a progressive bracket system. For 2026, rates range from 10% on the first $11,600 of taxable income up to 37% on income above $609,350 for single filers. Your effective rate is almost always lower than your marginal rate because only income above each threshold is taxed at the higher rate.
What are FICA taxes?
FICA covers Social Security (6.2% up to $176,100 in 2026) and Medicare (1.45% on all wages). Your employer matches these portions separately. An additional 0.9% Medicare surtax applies to wages above $200,000.
Calculate your exact take-home pay by state.
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