How U.S. Paycheck Taxes Work
Your gross pay is the salary you negotiated. Your net pay— the "take-home" amount that lands in your bank account — is what's left after several taxes are withheld from each paycheck. Here's what comes out, in the order it's usually calculated.
1. Pre-tax deductions
Before any income tax is figured, certain contributions come out of your gross pay and reduce the income that gets taxed. Common examples are traditional 401(k) contributions, health insurance premiums, and HSA or FSA contributions. Because these lower your taxable wages, they also lower your federal and (usually) state income tax.
2. Federal income tax
The federal income tax is progressive: income is taxed in bands called brackets, and only the income within each band is taxed at that band's rate. For 2026, rates run from 10% up to 37%. Before brackets are applied, you subtract the standard deduction (for 2026, $16,100 for single filers and $32,200 for married couples filing jointly). A common myth is that earning more can lower your take-home by "pushing you into a higher bracket" — that's not how it works. Only the dollars above each threshold are taxed at the higher rate.
3. FICA: Social Security and Medicare
FICA is a flat payroll tax separate from income tax. You pay 6.2% for Social Security (only up to an annual wage limit) and 1.45% for Medicare (on all wages), for 7.65% total. High earners pay an extra 0.9% Medicare surtax above certain thresholds. We cover this in detail in What is FICA?
4. State income tax
Most states also tax your income, but rates and rules vary enormously. Nine states levy no income tax on wages at all, some use a single flat rate, and others use their own progressive brackets. A few cities add a local income tax on top. This is the single biggest reason the same salary nets different take-home pay in different places — see Why your take-home pay differs by state.
Putting it together
Net pay = gross pay − pre-tax deductions − federal income tax − FICA − state (and any local) income tax. The result divided by the number of pay periods in the year is your per-paycheck take-home.
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