How Your Paycheck is Calculated
Your gross pay goes through several deduction layers before you see your net take-home pay. Understanding each component helps you plan your budget and optimize your withholding.
Step-by-Step Paycheck Calculation
Here is how the math works for a single filer earning $5,000 bi-weekly with a $500 401(k) contribution:
- Gross Pay: $5,000
- Pre-tax deductions: $500 (401k) + $200 (health) = $700 subtracted
- Federal taxable pay per period: $5,000 − $700 = $4,300
- Annualized federal taxable income: $4,300 × 26 = $111,800
- Standard deduction (single): $111,800 − $16,100 = $95,700 taxable
- Federal tax (from brackets): ~$14,776/year → ~$568/paycheck
- Social Security (6.2%): $5,000 × 6.2% = $310 (on gross, before 401k deduction)
- Medicare (1.45%): $5,000 × 1.45% = $72.50
- State tax: Varies by state
- Net Pay: $5,000 − $700 − $568 − $310 − $72.50 = ~$3,350
2026 Federal Income Tax Brackets
| Rate | Single | Married Filing Jointly |
|---|---|---|
| 10% | $0 – $12,400 | $0 – $24,800 |
| 12% | $12,401 – $50,600 | $24,801 – $101,200 |
| 22% | $50,601 – $104,900 | $101,201 – $209,800 |
| 24% | $104,901 – $178,100 | $209,801 – $356,200 |
| 32% | $178,101 – $480,050 | $356,201 – $768,600 |
| 35% | $480,051 – $640,600 | $768,601 – $960,900 |
| 37% | Over $640,600 | Over $960,900 |
Standard deduction: $16,100 (single), $32,200 (MFJ), $24,150 (HOH). These are subtracted before brackets apply.
Frequently Asked Questions
How is federal income tax withheld from my paycheck?
Your employer uses your W-4 and IRS Publication 15-T withholding tables. The process: your per-period pay is annualized, the standard deduction is subtracted, the 2026 tax brackets are applied to get annual tax, then that's divided by your number of pay periods. For a $5,000 bi-weekly paycheck (single, no extra elections), roughly $400-600 is withheld for federal taxes.
What is FICA and how much is withheld?
FICA covers Social Security (6.2%) and Medicare (1.45%). Social Security applies only to the first $184,500 of 2026 wages. Medicare has no cap. If your annual income exceeds $200,000 (single), an additional 0.9% Medicare surtax applies. Your employer matches the 6.2% and 1.45%, but not the extra 0.9%.
Do 401(k) contributions reduce my taxes?
Yes. Traditional 401(k) contributions are pre-tax — they reduce your federal and state taxable income. A $6,000/year 401(k) contribution saves $720 in federal taxes at the 12% bracket, or $1,320 at 22%. However, 401(k) contributions do not reduce Social Security or Medicare taxes, which are calculated on gross wages.
What does "bi-weekly vs semi-monthly" mean for my paycheck?
Bi-weekly (every 2 weeks) means 26 paychecks/year. Semi-monthly (twice per month) means 24 paychecks/year. With the same annual salary, bi-weekly paychecks are slightly smaller but you get 2 extra per year. This affects how withholding is calculated — bi-weekly divides annual tax by 26, semi-monthly by 24.
Why does my state tax vary so much?
States have vastly different approaches: 9 states have no income tax at all (TX, FL, WA, NV, TN, WY, AK, SD, NH on wages). Others use flat rates (IL: 4.95%, PA: 3.07%) or progressive brackets (CA: 1-12.3%, NY: 3.8-10.9%). Moving from CA to TX on the same $100,000 salary could increase take-home pay by $7,000-$10,000 per year.
How can I increase my take-home pay?
Increase pre-tax contributions (401k, HSA, FSA, health insurance) — each dollar reduces your federal and state tax bill. Review your W-4 and remove excess withholding. Consider a traditional IRA contribution (up to $7,500) which reduces taxable income. If married, ensure you're filing jointly to access the wider tax brackets.
What happens when I get a raise into a higher bracket?
Only the income above the bracket threshold gets taxed at the higher rate — not all your income. If you earn $50,000 (single) and get a $5,000 raise to $55,000, only the last ~$4,400 (above the 12% bracket top of $50,600) gets taxed at 22%. You keep the difference — a raise always increases your net pay.