Four things come out of almost every paycheck: federal income tax, state income tax (in most states), and the two halves of FICA — Social Security at 6.2% and Medicare at 1.45%, which together make up the 7.65% payroll tax. On top of those, you may see pre-tax deductions for retirement and health insurance. Here is what each one is.
The two big categories: taxes and deductions
Everything taken from your paycheck falls into one of two buckets. Taxes are mandatory payments to federal, state, and sometimes local governments. Deductions are amounts withheld for benefits you signed up for, like a 401(k) or health insurance. Some deductions are pre-tax, meaning they come out before income tax is calculated and lower your taxable income. Your gross pay is what you earned; your net pay (take-home) is what is left after both buckets are subtracted. For the full mechanics, see Gross Pay vs. Net Pay, Explained.
FICA: Social Security and Medicare
FICA is a flat 7.65% payroll tax split into two parts, and it is usually the most predictable line on your stub. The Social Security portion is 6.2% of your wages and the Medicare portion is 1.45%, which add up to 7.65% (IRS Topic No. 751). Your employer matches both, paying another 7.65% you never see.
There are two important limits. Social Security tax only applies up to an annual wage base, which is $184,500 for 2026 (SSA Contribution and Benefit Base). Earn above that and you stop paying the 6.2% for the rest of the year. Medicare has no cap — the 1.45% applies to every dollar.
The Additional Medicare Tax
High earners pay a little more. An extra 0.9% Additional Medicare Tax applies to wages above $200,000 if you file single, or $250,000 if married filing jointly (IRS Topic No. 560). Your employer starts withholding it once your year-to-date wages cross $200,000, regardless of your filing status, so some people see it adjusted at tax time.
Federal income tax
Federal income tax is withheld based on the W-4 form you filled out when you started your job, not a flat percentage. The U.S. uses a progressive system with seven brackets — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — that were made permanent for 2026 (IRS 2026 inflation adjustments). Only the income inside each bracket is taxed at that bracket’s rate, so a raise never pushes your whole salary into a higher rate.
Your employer estimates your annual tax from your W-4 and spreads the withholding across every paycheck. The 2026 standard deduction — $16,100 for single filers and $32,200 for married couples filing jointly (IRS) — shields the first chunk of income from tax entirely, which is why withholding is lower than your top bracket suggests.
State and local income tax
State income tax is the line that varies most by where you live. Most states withhold their own income tax, but several — including Florida, Texas, Washington, Nevada, Tennessee, and a handful of others — have no state income tax at all (Tax Foundation). Some states use a flat rate; others have brackets like the federal system.
A smaller number of cities and counties add local income tax on top, common in places like New York City, parts of Ohio, and parts of Pennsylvania. If you see a deduction you do not recognize, it is often a local levy. Your state’s department of revenue is the authority for exact rates.
Pre-tax deductions that shrink your taxable income
Pre-tax deductions come out before income tax is calculated, so they lower both your take-home pay and your tax bill. The most common are 401(k) or 403(b) retirement contributions, which reduce the wages subject to federal and most state income tax (though not FICA). Health, dental, and vision insurance premiums are usually pre-tax too, along with contributions to an HSA or FSA.
Because these reduce taxable income, contributing to a traditional 401(k) costs you less in take-home pay than the dollar amount you contribute. After-tax deductions — like a Roth 401(k), union dues, or wage garnishments — come out of pay that has already been taxed and do not lower your tax bill.
Frequently asked questions
Why is my paycheck so much smaller than my salary?
Between federal income tax, FICA’s flat 7.65%, and state income tax in most states, a meaningful share of gross pay is withheld before you ever see it. Pre-tax deductions for retirement and insurance shrink it further. The gap between gross and net is normal and largely mandatory.
What is FICA on my pay stub?
FICA stands for the Federal Insurance Contributions Act. It is the combined 7.65% payroll tax that funds Social Security (6.2%) and Medicare (1.45%) (IRS Topic No. 751). Your employer withholds it and matches it dollar for dollar, so the program actually receives 15.3% of your wages.
Can I reduce how much is taken out?
You can adjust federal withholding by updating your W-4, and you can lower taxable income by contributing more to pre-tax accounts like a 401(k) or HSA. You cannot reduce FICA, which is a flat rate. Aim to withhold close to what you owe, not far above it.
Does everyone pay state income tax?
No. Several states — including Florida, Texas, Washington, and Nevada — have no state income tax, so residents there see only federal tax and FICA withheld (Tax Foundation). Most other states withhold their own income tax, and a few cities add a local tax on top.
Want to see exactly where your paycheck goes? Run the numbers with the free Treasury paycheck calculator, read the full Understanding Your Paycheck (2026) guide, and when you are ready to track every deduction against your real spending, start a 14-day free trial.