How Your Paycheck Is Calculated
Every paycheck goes through a gauntlet of deductions before it reaches your bank account. Your employer starts with your gross pay—your annual salary divided by the number of pay periods—then subtracts federal income tax withholding, state income tax, Social Security tax (6.2%), Medicare tax (1.45%), and any pre-tax or post-tax deductions you've elected. What's left is your net pay, also called take-home pay.
Understanding each deduction helps you make smarter decisions about retirement contributions, HSA elections, and withholding allowances. A $75,000 salary doesn't mean $75,000 in your pocket—after all deductions, a single filer in California might take home closer to $54,000 annually.
Federal Income Tax Withholding
Federal income tax uses a progressive bracket system. Your employer withholds taxes from each paycheck based on your W-4 filing status and the IRS withholding tables. The more you earn, the higher your marginal rate—but only income above each threshold is taxed at the higher rate.
For 2026, single filers pay 10% on the first $11,925 of taxable income, 12% on $11,925–$48,475, 22% on $48,475–$103,350, and so on up to 37% for income over $626,350. Your effective rate—the actual percentage of income that goes to federal tax—is always lower than your marginal bracket. Use our tax bracket calculator to see exactly how your income is taxed across each bracket.
Social Security and Medicare (FICA)
FICA taxes fund Social Security and Medicare. Every worker pays 6.2% of gross wages toward Social Security (up to the wage base limit of $176,100 in 2026) and 1.45% toward Medicare with no cap. If you earn over $200,000 as a single filer ($250,000 married filing jointly), you also pay an additional 0.9% Medicare surtax on income above that threshold.
Combined, FICA takes 7.65% of your paycheck for most workers. Your employer matches this amount, meaning the total FICA contribution on your behalf is 15.3%. These taxes are flat—not progressive—so they hit lower-income workers proportionally harder than high earners who exceed the Social Security wage base.
State Income Tax
State income tax varies dramatically. Nine states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—have no state income tax on wages. California tops the scale at 13.3% for high earners, while most states fall between 3% and 7%.
Some states use flat rates (like Illinois at 4.95% and Colorado at 4.4%), while others use progressive brackets similar to the federal system. Your state tax can add $2,000 to $10,000+ per year in deductions depending on where you live and how much you earn. Moving from a high-tax state to a no-income-tax state on a $100,000 salary could save you $5,000–$8,000 annually.
Pre-Tax vs Post-Tax Deductions
Pre-tax deductions reduce your taxable income before federal and state taxes are calculated. These include traditional 401(k) contributions, health insurance premiums, HSA contributions, and flexible spending accounts. A $500/month 401(k) contribution on a $75,000 salary effectively reduces your taxable income to $69,000—saving you roughly $1,320 in federal tax if you're in the 22% bracket.
Post-tax deductions come out after taxes. These include Roth 401(k) contributions, life insurance premiums, union dues, and wage garnishments. Post-tax deductions don't reduce your current tax bill, but Roth contributions grow and are withdrawn tax-free in retirement.
The right mix depends on your current vs. expected future tax bracket. If you expect to earn more later, Roth (post-tax) contributions make sense. If you're in a high bracket now and expect lower income in retirement, pre-tax contributions give you an immediate tax break. For a complete picture of how to allocate your after-tax income, try our 50/30/20 budget calculator. If you're self-employed and need to estimate quarterly taxes, use our freelance tax calculator.