How Paycheck Taxes Work in the US, Step by Step
Last updated: October 2026
The short answer: every US paycheck goes through the same chain. Your employer starts with gross pay, removes pre-tax deductions, withholds federal income tax, takes Social Security and Medicare, adds any state or local tax, subtracts post-tax items, and pays you the rest. On a $60,000 salary paid every two weeks, a gross check of $2,307.69 becomes about $1,938 in a state with no income tax. Here is each step in plain English.
Step 1: Start with gross pay for the pay period
Your employer first works out what you earned this period. A salaried worker earning $60,000 and paid every two weeks gets $60,000 ÷ 26 = $2,307.69. Hourly workers get hours times their rate, plus any overtime, which is explained in how overtime pay works.
Step 2: Take out pre-tax deductions
Some deductions come off before income tax is calculated. Traditional 401(k) contributions and health insurance premiums paid through the employer's plan are the common ones. They lower the pay that gets taxed, which is why they reduce your tax bill. Paycheck deductions explained covers them in detail. We'll keep the main example simple with none, then add them in a moment.
Step 3: Federal income tax withholding
This is the first of the big three. Your employer uses the information on your Form W-4, your filing status and the IRS withholding tables in Publication 15-T to estimate how much federal income tax to hold back each pay period. The goal is to approximate your yearly bill, spread across your paychecks. For a single filer earning $60,000, the 2026 federal tax is about $5,020 after the $16,100 standard deduction, which is roughly $193 per biweekly check. See federal income tax withholding for the full logic.
Step 4: Social Security and Medicare (FICA)
These are flat percentages of your wages. According to the IRS, the employee Social Security rate is 6.2% on wages up to $184,500 in 2026, and Medicare is 1.45% on all wages. On a $2,307.69 check that's $143.08 and $33.46. Your employer pays a matching amount on top, which you never see on your stub. There's more in what is FICA tax.
Step 5: State and local taxes
This is where location changes your pay the most. States fall into three rough groups:
- No wage income tax: for example Texas, Florida, Washington, Nevada and Tennessee.
- Flat rate: for example Illinois, Pennsylvania and Massachusetts.
- Graduated brackets: for example California and New York, where higher incomes face higher rates.
A few cities, such as New York City, add a local income tax. Some states also take small amounts for disability or paid family leave programs. Check your own state's tax agency for current rates.
Step 6: Post-tax deductions
Last come the items that don't reduce your tax: Roth 401(k) contributions, union dues, charitable payroll giving or a court-ordered wage garnishment.
The finished paycheck
| Line | Biweekly |
|---|---|
| Gross pay | $2,307.69 |
| Federal income tax (estimate) | −$193.08 |
| Social Security | −$143.08 |
| Medicare | −$33.46 |
| State tax (Texas) | $0.00 |
| Net pay | $1,938.07 |
Multiply by 26 and the yearly net is about $50,390, which is the same figure used in gross pay vs net pay. Take the same worker to a state with income tax and an extra line appears, shrinking the deposit.
Example 2: with a 401(k) and health insurance
Now add a 6% traditional 401(k) contribution ($138.46 per check) and $92.31 per check for pre-tax health insurance. Federal withholding falls to about $165.38. Social Security and Medicare drop to $169.48 combined, because the insurance premium isn't subject to payroll tax. Net pay becomes $1,742.06. That's $196 lower than the first example, but $138 of it went into the worker's own retirement account.
Example 3: a high earner
At $200,000 a year, Social Security tax stops once wages reach $184,500, for a maximum of $11,439. Medicare keeps going on every dollar, at 1.45%. According to the IRS, employers must also start withholding an extra 0.9% Additional Medicare Tax once they've paid an employee more than $200,000 in the calendar year, whatever the employee's filing status. The final tax can differ when you file, and any over-withholding can be credited on your return.
Withholding is a prepayment, not your final bill
The tax taken from each check is an estimate. After the year ends, your employer sends a W-2. Box 1 shows taxable wages, Box 2 federal income tax withheld, Box 4 Social Security tax withheld, and Box 6 Medicare tax withheld. When you file your return, the IRS compares your real tax with what was already paid. If you overpaid, you get a refund. If you underpaid, you owe the difference. A large refund simply means too much was withheld during the year, which is a good reason to review your W-4 after big life changes.
How bonuses are treated
Extra pay like a bonus is called supplemental wages, and employers often withhold federal income tax on it at a flat 22%. That can make a bonus check look small, even though your final tax depends on your bracket. Try the bonus tax calculator to see the difference.
Does your pay frequency change anything?
Your yearly tax stays the same, but the amount per check shifts because payroll divides your estimated annual tax by the number of checks. See biweekly vs semimonthly pay and how pay frequency affects paychecks.
Check your own paycheck
Compare your latest stub with the US paycheck calculator. If your federal withholding or net pay is far off, review your W-4 or ask payroll. Not sure where to look? How to read a pay stub explains each line. People outside the US can use the Canada paycheck calculator or the UK salary calculator.
Frequently asked questions
What taxes are taken out of a paycheck in the US? Federal income tax, Social Security, Medicare, and in most places state income tax, sometimes with local taxes and state program contributions.
How much of my paycheck goes to taxes? For a single worker earning $60,000 with no state tax, about 16%, or $9,610 a year, covers federal income tax and payroll taxes.
Do employers pay payroll taxes too? Yes. They match your Social Security and Medicare tax and pay additional employer taxes such as unemployment tax.
Why does my paycheck change when my pay is the same? Usually because of overtime, deduction changes or pay periods with different numbers of days.
Written by Muhammad Tabish. Rates checked in October 2026 against IRS Publication 926 (2026), which lists the $184,500 Social Security wage base, the 6.2% and 1.45% rates and the $200,000 Additional Medicare withholding threshold, and IRS Publication 15-T. Examples are for a single filer using the 2026 standard deduction. This is general information, not tax advice.