Every paycheck you receive has several taxes taken out before the money hits your bank account. The main ones are federal income tax, Social Security tax, Medicare tax, and (in most states) state income tax. Understanding how each is calculated helps you verify your pay stub is correct and predict your take-home pay when your salary or hours change.
Start With Your Gross Pay
Your gross pay is your total earnings before anything is subtracted. If you’re salaried, divide your annual salary by the number of pay periods in a year (26 for biweekly, 24 for semimonthly, 52 for weekly, 12 for monthly). If you’re hourly, multiply your hours worked by your hourly rate, including any overtime at the appropriate rate.
Gross pay is the starting point, but it’s not the number that gets taxed directly. Pre-tax deductions come out first, and they make a real difference.
How Pre-Tax Deductions Lower Your Taxes
Pre-tax deductions are subtracted from your gross pay before taxes are calculated. Common examples include health insurance premiums, contributions to a traditional 401(k) or 403(b) retirement plan, health savings account (HSA) contributions, and group-term life insurance. Because these come out first, they reduce your taxable income, which means less federal income tax, and in most cases less Social Security and Medicare tax too.
For example, if your gross pay for a biweekly period is $3,000 and you contribute $200 to a 401(k) and pay $150 toward health insurance, your taxable wages drop to $2,650 before any tax math begins.
Post-tax deductions, by contrast, are taken out after taxes have been withheld. These include Roth 401(k) or Roth IRA contributions, union dues, wage garnishments, and charitable donations through payroll. They reduce your take-home pay but don’t lower your tax bill.
Social Security and Medicare (FICA) Taxes
FICA taxes are the most straightforward to calculate because the rates are flat percentages with no brackets or filing-status adjustments.
- Social Security: 6.2% of your taxable wages, up to the annual wage base of $184,500 in 2026. Once your cumulative earnings for the year hit that cap, Social Security tax stops being withheld for the rest of the year. Your employer pays a matching 6.2%.
- Medicare: 1.45% of all taxable wages, with no cap. Your employer again matches at 1.45%. If your total wages exceed $200,000 in a calendar year, an additional 0.9% Medicare surtax kicks in on the amount above that threshold. Your employer does not match the surtax.
On a biweekly paycheck of $2,650 in taxable wages, Social Security would be $164.30 (2,650 × 0.062) and Medicare would be $38.43 (2,650 × 0.0145), for a combined FICA hit of $202.73.
Federal Income Tax Withholding
Federal income tax is the most complex piece because the amount withheld depends on your filing status, how many pay periods you have per year, and the information you put on your W-4 form. The IRS provides two methods employers can use: the Percentage Method and the Wage Bracket Method. Both produce similar results, and most payroll software handles this automatically, but here’s the logic behind it.
How the Calculation Works
Your employer takes your taxable wages for the pay period (after pre-tax deductions) and annualizes them. For a biweekly paycheck of $2,650, that means multiplying by 26 to get $68,900 as the projected annual income. The employer then adjusts this figure based on your W-4: adding any extra income you reported in Step 4(a) and subtracting any deductions you claimed in Step 4(b).
This adjusted annual figure is run through the federal tax brackets, which are progressive. In 2026, the seven rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For a single filer, the first $12,400 is taxed at 10%, the next chunk from $12,401 to $50,400 is taxed at 12%, and income from $50,401 to $105,700 is taxed at 22%, and so on. Only the dollars in each range are taxed at that range’s rate.
For our single filer with $68,900 in projected annual income, the federal tax would be roughly: $1,240 on the first $12,400, plus $4,560 on the next $38,000, plus $4,070 on the remaining $18,500. That totals about $9,870 for the year, or around $379.62 per biweekly paycheck.
The employer then subtracts any tax credits. If you claimed dependents in Step 3 of your W-4, that annual credit amount is divided by 26 (for biweekly pay) and subtracted from the tentative withholding. A $2,000 child tax credit, for instance, would reduce each biweekly withholding by about $76.92. Finally, if you requested extra withholding in Step 4(c) of your W-4, that amount is added back on top.
Why Your W-4 Matters So Much
The W-4 is the main lever you have over federal withholding. If you have a second job or a working spouse, checking the box in Step 2 adjusts the bracket math so you’re not under-withheld. Claiming deductions in Step 4(b), like a large mortgage interest deduction, lowers the income your employer uses in the bracket calculation. And Step 4(c) lets you request a flat additional dollar amount be withheld each pay period, which is useful if you have freelance income or other sources that don’t have their own withholding.
State Income Tax
Nine states have no income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you work and live in one of these states, you can skip this section entirely.
The remaining states fall into two camps. Fifteen states use a flat tax, meaning one percentage rate applies to all your taxable income. The math works just like FICA: multiply your state taxable wages by the rate. Twenty-six states and the District of Columbia use graduated brackets, similar in concept to the federal system, where higher slices of income are taxed at higher rates. The number of brackets varies widely, from just a few to more than a dozen.
Your state withholding is typically calculated using a state-specific version of the W-4 (some states accept the federal form) and your employer applies the appropriate state tables. Check your pay stub for a line labeled “State” or your state’s abbreviation to see the amount.
Putting It All Together
Here’s a simplified walkthrough using round numbers. Say you earn $60,000 per year, are paid biweekly (26 pay periods), file as single, contribute $200 per paycheck to a traditional 401(k), and pay $150 per paycheck for health insurance.
- Gross pay per paycheck: $2,307.69 ($60,000 ÷ 26)
- Pre-tax deductions: $350 ($200 + $150)
- Taxable wages: $1,957.69
- Social Security (6.2%): $121.38
- Medicare (1.45%): $28.39
- Federal income tax: Varies by W-4, but for a single filer with no adjustments, roughly $160 to $190
- State income tax: Depends on your state, from $0 to $100+ per paycheck at this income
After all taxes and deductions, this person’s take-home pay would land somewhere around $1,250 to $1,400 per biweekly paycheck, depending on state taxes and the specifics of their W-4.
How to Check Your Numbers
Your pay stub should break out each deduction and tax line by line. Compare the Social Security and Medicare amounts against the percentages above to make sure they match your taxable wages. For federal income tax, the IRS offers a free Tax Withholding Estimator at irs.gov that lets you enter your pay stub data and see whether you’re on track to owe, get a refund, or break even at tax time. If you’re consistently getting large refunds (over $1,000), you’re having too much withheld and could adjust your W-4 to keep more in each paycheck. If you owed a big balance at filing time, you may need to increase withholding through Step 4(c) of your W-4 or by updating your filing status.