Understanding Paycheck Taxes, FICA & Deductions (2026)
When you receive your paycheck, the gap between gross pay and what lands in your account can be large. This guide walks through each required tax and common deduction, in the order payroll applies them.
From gross pay to take-home pay
Payroll works through your pay in this order:
Gross Pay− Pre-Tax Deductions (401k, Health Insurance, HSA/FSA)= Federal & State Taxable Wages− Federal Income Tax Withholding (IRS Form W-4)− FICA Payroll Taxes (6.2% Social Security + 1.45% Medicare)− State & Local Income Tax Withholding− Post-Tax Deductions (Roth 401k, Garnishments, Charity)= Net Take-Home Pay
2026 federal income tax brackets
The U.S. federal income tax system is progressive, meaning higher portions of income are taxed at progressively higher rates. For tax year 2026 (IRS Revenue Procedure 2025-32), the standard deductions and tax brackets are:
- Single filers standard deduction: $16,100
- Married filing jointly standard deduction: $32,200
- Head of household standard deduction: $24,150
| Marginal rate | Single taxable income |
|---|---|
| 10% | $0 through $12,400 |
| 12% | Over $12,400 through $50,400 |
| 22% | Over $50,400 through $105,700 |
| 24% | Over $105,700 through $201,775 |
| 32% | Over $201,775 through $256,225 |
| 35% | Over $256,225 through $640,600 |
| 37% | Over $640,600 |
A raise won't shrink your take-home pay
A common fear among workers is that a pay raise moving them from the 12% bracket into the 22% bracket will cause their entire salary to be taxed at 22%, reducing their net take-home pay. Moving into a higher federal bracket does not, by itself, reduce take-home pay.
Only the dollars earned above the $50,400 taxable threshold are taxed at 22%. All dollars earned below that threshold continue to be taxed at 10% and 12%, while the standard deduction reduces federal taxable income. Social Security and Medicare taxes can still apply to those wages.
FICA payroll taxes (Social Security & Medicare)
The Federal Insurance Contributions Act (FICA) funds Social Security and Medicare through payroll withholding:
- Social Security tax (OASDI): 6.2% of gross earned wages, paid by the employee, and matched 6.2% by the employer (total 12.4%). For tax year 2026, the Social Security wage base limit is $184,500. Any income earned above $184,500 is exempt from the 6.2% Social Security tax, capping maximum annual employee withholding at $11,439.00.
- Medicare tax (hospital insurance): 1.45% of gross wages, matched 1.45% by the employer (total 2.9%). Unlike Social Security, Medicare has no wage cap; it applies to all earned income.
- Additional Medicare tax: Under the Affordable Care Act (ACA), employers withhold an extra 0.9% Additional Medicare tax on wages they pay an employee above $200,000, regardless of filing status. Final liability uses filing-status thresholds, including $250,000 for married filing jointly. Employers do not match this tax.
Pre-tax vs. post-tax deductions
Deductions taken from your paycheck fall into two groups:
Pre-tax deductions (reduce your taxable income)
Contributions made with pre-tax dollars are subtracted from your gross wages before income taxes are calculated, providing immediate tax relief:
- Traditional 401(k), 403(b), or 457 plans: Generally lowers federal taxable wages and may lower state taxable wages. These retirement contributions still count as FICA wages.
- Section 125 cafeteria plans: Employer-sponsored health, dental, and vision insurance premiums.
- Health savings accounts (HSA) & flexible spending accounts (FSA): Eligible cafeteria-plan payroll contributions generally reduce federal income tax and FICA wages. Direct personal HSA contributions do not reduce FICA; state tax treatment can differ.
- Qualified commuter benefits: Transit passes and parking up to the monthly limits.
For example, if you sit in the 22% federal bracket and pay 5% state tax, contributing $500/month to a traditional 401(k) reduces your actual monthly take-home check by only about $365. The remaining $135 is paid for through tax savings.
State and local income taxes
Where you live and work materially changes your net paycheck:
- Zero-state-income-tax states: Alaska, Florida, Nevada, New Hampshire (no wage tax), South Dakota, Tennessee, Texas, Washington, and Wyoming charge 0% state income tax on employee wages. Test these on our Texas Paycheck Calculator and Florida Paycheck Calculator.
- Progressive tax states: States like California (with progressive income tax and a separate SDI contribution) and New York (up to 10.9%) take a substantial slice of earned income. See our California Paycheck Calculator.
- Municipal & city wage taxes: Residents of cities like New York City, Philadelphia, and Yonkers pay local income tax on top of federal and state taxes. Use our NYC Paycheck Calculator for an estimate that includes modeled city income tax.
Planning example: A $65,000 annual salary
This annual-tax estimate assumes a $65,000 salary in Texas, single filing status, 26 checks, no benefit deductions, no other income, and no credits. Actual payroll withholding can differ from annual tax divided by pay periods:
- Annual gross pay: $65,000.00 ($2,500.00 biweekly)
- Standard deduction: $16,100.00
- Federal taxable income: $48,900.00
- Federal income tax: $1,240.00 (10% on first $12.4k) + $4,380.00 (12% on remaining $36.5k) = $5,620.00 ($216.15/check)
- Social Security tax (6.2%): $4,030.00 ($155.00/check)
- Medicare tax (1.45%): $942.50 ($36.25/check)
- Total FICA: $4,972.50 ($191.25/check)
- Total deductions: $10,592.50 (16.30% effective tax rate)
- Estimated net annual take-home: $54,407.50 ($2,092.60 per biweekly check)
Calculate your paycheck estimate on our free Paycheck Calculator.
Sources and further reading
- IRS Publication 505: 2026 tax tables
- SSA contribution and benefit base
- IRS Additional Medicare Tax FAQ