How U.S. Paycheck Taxes Work
Updated July 20, 2026 · Figures reflect 2026 IRS, SSA, and state tax data — see our methodology.
If you earn $75,000 a year, you do not take home $75,000 — and the gap surprises almost everyone who looks at their first pay stub. Between federal income tax, Social Security, Medicare, and (in most states) state income tax, a typical single filer keeps roughly 75–80% of gross pay. This guide walks through every deduction in the order it happens, using real 2026 numbers, so you can understand exactly where the rest goes.
The three layers of paycheck taxes
Every U.S. paycheck is reduced by up to three separate tax systems, each with its own rules:
- Federal income tax — progressive brackets from 10% to 37%, applied after the standard deduction.
- FICA — Social Security (6.2%) and Medicare (1.45%), flat percentages from the first dollar.
- State income tax— anywhere from 0% (nine states) to over 13% (California's top bracket), depending on where you live.
Some cities and counties add a fourth layer — New York City, Maryland counties, and many Ohio municipalities levy local income taxes — and some states add payroll programs like California's SDI or New Jersey's unemployment and disability contributions.
Step 1: Pre-tax deductions come out first
Before any tax is calculated, pre-tax benefits are subtracted from your gross pay. The big ones are traditional 401(k) contributions, health insurance premiums paid through your employer, HSA and FSA contributions, and commuter benefits. These reduce your taxableincome, which is why contributing to a 401(k) "costs" less than the sticker amount — a $500 contribution might only shrink your paycheck by $380 or so, because you skip income tax on it. (See how a 401(k) changes your paycheck for worked examples.)
One nuance: most pre-tax deductions still get hit by FICA. 401(k) contributions, for example, reduce your income tax but not your Social Security and Medicare tax. HSA contributions made through payroll are the rare exception that escapes both.
Step 2: Federal income tax and the 2026 brackets
Federal income tax uses progressive brackets. For 2026, a single filer first subtracts the standard deduction of $16,100 ($32,200 married filing jointly, $24,150 head of household). Only the income left after that — your taxable income — is run through the brackets:
| Rate | Single — taxable income over | Married filing jointly — over |
|---|---|---|
| 10% | $0 | $0 |
| 12% | $12,400 | $24,800 |
| 22% | $50,400 | $100,800 |
| 24% | $105,700 | $211,400 |
| 32% | $201,775 | $403,550 |
| 35% | $256,225 | $512,450 |
| 37% | $640,600 | $768,700 |
The single most misunderstood fact about U.S. taxes: brackets are marginal. Crossing into the 22% bracket does not mean all of your income is taxed at 22% — only the dollars above the threshold are. A single filer with $75,000 gross pays 10% on the first slice of taxable income, 12% on the next, and 22% only on the top portion. That works out to about $7,670 of federal income tax — an effective federal rate of roughly 10.2%, nowhere near 22%.
This is also why getting a raise can never reduce your take-home pay. Each extra dollar is taxed at your marginal rate, but the dollars below it keep their lower rates. The "I got bumped into a higher bracket and now I earn less" story is a myth.
Step 3: FICA — Social Security and Medicare
FICA is simpler and, for many earners, bigger than federal income tax. It has no standard deduction and no lower brackets:
- Social Security: 6.2% of wages up to $184,500 in 2026. Above that, it stops for the year.
- Medicare: 1.45% of all wages, plus an extra 0.9% on wages above $200,000 (single) / $250,000 (married).
Together that is 7.65% off the top for most workers. Your employer pays a matching 7.65% that never appears on your stub. Read the full breakdown in What is FICA?
Step 4: State (and local) income tax
Where you live changes the math dramatically. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — levy no tax on wage income at all. Others use a flat rate (Illinois, Colorado, Pennsylvania, and more), and the rest use their own progressive brackets, topping out anywhere from about 4% to over 13%.
On a $75,000 salary, the state layer alone can swing your annual take-home by $3,000–$5,000. We cover this in depth in Why your take-home pay differs by state, and you can compare two states side by side.
A complete worked example: $75,000, single, biweekly
Here is the full stack for a single filer earning $75,000 in a state with a roughly 4% effective state tax, paid every two weeks (26 paychecks):
| Item | Annual | Per paycheck |
|---|---|---|
| Gross pay | $75,000 | $2,884.62 |
| Federal income tax | −$7,670 | −$295.00 |
| Social Security (6.2%) | −$4,650 | −$178.85 |
| Medicare (1.45%) | −$1,088 | −$41.83 |
| State income tax (~4%) | −$3,000 | −$115.38 |
| Take-home pay | ≈ $58,600 | ≈ $2,253 |
That is an overall effective tax rate of about 22% — even though this person's top marginal federal bracket is 22% and their state adds roughly 4% on top. Marginal and effective rates are very different animals, and confusing them is the source of most paycheck sticker shock.
Withholding is an estimate, not your real tax bill
The amounts on your pay stub are withholding— your employer's best guess at your annual tax, based on the W-4 form you filled out when you were hired. Your actual tax is settled once a year on your tax return. Withhold too much during the year and you get a refund; too little and you owe.
A big refund feels nice but simply means you gave the IRS an interest-free loan all year. If your refund (or bill) is consistently large, updating your W-4 — especially after marriage, a second job, or a big raise — brings your paycheck closer to reality.
Frequently asked questions
Why is my first paycheck smaller than I expected?
Usually a combination of taxes you did not budget for (FICA surprises almost everyone), benefit premiums starting immediately, and sometimes a partial pay period. Occasionally payroll defaults your W-4 to a higher-withholding setting until your real form is processed.
What percentage of my paycheck goes to taxes?
For most full-time workers, total withholding lands between 18% and 30% of gross pay — lower for modest incomes in no-tax states, higher for large incomes in high-tax states. Run your own numbers with the paycheck calculator for a per-state estimate.
Do bonuses and overtime follow the same rules?
The same taxes apply, but withholding works differently for supplemental pay — which is why bonuses look so heavily taxed. See Why is my bonus taxed so much? and Is overtime taxed more?
Ready to see your own numbers? Pick your state in the U.S. paycheck calculator and get a 2026 estimate of your take-home pay in seconds.