Paycheck Deductions Explained: From Gross to Net
Built & reviewed by Nandu Kannan · Overtime rules cited to primary statutes
Gross pay is what you earn; net pay is what arrives. The distance between them is a fixed sequence of deductions, and once you can read that sequence, every line on a pay stub makes sense. This guide walks the full path — federal income tax, FICA, state tax, and elected deductions — with the 2026 numbers, ending in a worked $65,000 example computed by the same engine as our paycheck calculator.
In 2026, every W-2 worker pays a flat 7.65% of their first $184,500 in wages to FICA — 6.2% Social Security plus 1.45% Medicare — before a single dollar of income tax is counted.
The order of operations
- Gross pay — hours × rate (plus overtime, bonuses, differentials), or salary ÷ pay periods.
- Pre-tax deductions — traditional 401(k), HSA/FSA, most health premiums. These shrink the wages the next steps tax.
- Taxes — federal income tax withholding, Social Security, Medicare, state (and sometimes city) income tax.
- Post-tax deductions — Roth 401(k), garnishments, union dues, extra insurance.
- Net pay — the deposit.
Federal income tax: the 2026 brackets
Federal tax is progressive: each slice of taxable income is taxed at its own rate, and only the slice inside a bracket pays that bracket's rate. Taxable income means gross minus the standard deduction ($16,100 single / $32,200 married in 2026) and pre-tax deductions. The table below is rendered directly from the bracket data our calculator uses:
| Rate | Single — taxable income | Married filing jointly |
|---|---|---|
| 10% | $0 – $12,400 | $0 – $24,800 |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 |
| 22% | $50,400 – $105,700 | $100,800 – $211,400 |
| 24% | $105,700 – $201,775 | $211,400 – $403,550 |
| 32% | $201,775 – $256,225 | $403,550 – $512,450 |
| 35% | $256,225 – $640,600 | $512,450 – $768,700 |
| 37% | over $640,600 | over $768,700 |
Being "in the 22% bracket" therefore does not mean paying 22% of your income — the first slices are still taxed at 10% and 12%. Your effective rate is always lower than your top marginal rate.
FICA: Social Security and Medicare
- Social Security: 6.2% of wages up to the $184,500 wage base (2026). Earn more and the deduction simply stops for the rest of the year — the reason high earners see a mid-year "raise."
- Medicare: 1.45% of all wages, no cap, plus an Additional Medicare tax of 0.9% on wages above $200,000 (single) / $250,000 (married).
Your employer matches the 7.65% invisibly. Self-employed people pay both halves — see our 1099 vs W-2 guide for what that costs in practice.
State income tax
Forty-one states plus D.C. tax wages, ranging from Pennsylvania's 3.07% flat rate to California's 12.3% top bracket; nine states — including Texas, Florida, and Washington — withhold nothing. Some cities (New York City, many Ohio municipalities) add a local layer. Compare your own state with the paycheck calculator, or jump straight to the California, Texas, or New York pages.
Withholding is an estimate, not the tax
One distinction saves a lot of confusion: the federal income tax on your stub is withholding — your employer's running estimate of the annual bill, driven by the W-4 you filed. The brackets above determine the real tax when you file. If withholding overshoots, the difference comes back as a refund; if it undershoots (common with two jobs or large bonuses), you owe in April. FICA, by contrast, is exact — a fixed percentage with nothing to reconcile. Whenever your situation changes (marriage, second job, a dependent), file a new W-4 rather than waiting for filing season to discover the gap.
Pre-tax vs post-tax deductions
| Deduction | Reduces income tax? | Reduces FICA? |
|---|---|---|
| Traditional 401(k) | Yes | No |
| HSA (via payroll) | Yes | Yes |
| Health/dental/vision premiums (Section 125) | Yes | Yes |
| FSA | Yes | Yes |
| Roth 401(k) | No (tax-free later) | No |
| Garnishments, union dues | No | No |
The practical effect: a $200-per-paycheck traditional 401(k) contribution costs a 22%-bracket worker only about $156 of take-home, because $44 of it would have gone to income tax anyway. A payroll HSA contribution does even better — it skips FICA too.
Worked example: $65,000, single, paid biweekly
The figures below come from the takeHome() engine behind our paycheck calculator, using a no-income-tax state (Texas) so the federal math stands alone. Standard deduction, no pre-tax elections:
| Line | Annual | Per biweekly check (26/yr) |
|---|---|---|
| Gross pay | $65,000.00 | $2,500.00 |
| Federal income tax | −$5,620.00 | −$216.15 |
| Social Security (6.2%) | −$4,030.00 | −$155.00 |
| Medicare (1.45%) | −$942.50 | −$36.25 |
| Net pay | $54,407.50 | $2,092.60 |
Total tax is $10,592.50 — an effective rate of 16.3%, even though this worker's top marginal bracket is 22%. In a state with income tax, the state line is subtracted on top; in California the same salary loses roughly another $2,500 a year.
Reading your pay stub
Every stub has the same skeleton: earnings (regular, overtime, bonus — with hours and rates), taxes (often abbreviated FIT or FED for federal income tax, "OASDI" or "SS" for Social Security, "MED" for Medicare, and your state code), deductions (pre-tax listed before post-tax), and year-to-date columns for each. Two quick checks catch most payroll errors: confirm the hours and rate on the earnings line match your timesheet, and confirm OASDI is exactly 6.2% of FICA-taxable gross. If either is off, raise it the same pay period — corrections get harder across year-end.
Frequently asked questions
Why is my paycheck so much smaller than my salary divided by paychecks?
Four mandatory amounts come out before money reaches you: federal income tax withholding, Social Security (6.2%), Medicare (1.45%), and state income tax in most states. For a typical single filer earning $65,000, those total roughly 16% of gross before any 401(k), health insurance, or other elected deductions — which can easily push the gap past 25%.
What is FICA on my pay stub?
FICA (Federal Insurance Contributions Act) is Social Security plus Medicare. In 2026 you pay 6.2% Social Security on wages up to $184,500 and 1.45% Medicare on all wages, with an extra 0.9% Medicare on wages above $200,000 ($250,000 married). Your employer pays a matching 7.65% on top — it just never appears on your stub.
What is the difference between pre-tax and post-tax deductions?
Pre-tax deductions (traditional 401(k), HSA, most employer health premiums) come out before taxes are computed, so they lower your taxable income — a $100 pre-tax contribution costs well under $100 of take-home for most earners. Post-tax deductions (Roth 401(k), disability buy-ups, wage garnishments) come out after taxes and reduce take-home dollar for dollar.
Does a 401(k) contribution reduce Social Security and Medicare tax?
No. Traditional 401(k) contributions reduce federal and state income tax, but FICA is computed on your wages before the 401(k) comes out. HSA contributions made through payroll, by contrast, escape FICA as well — one reason HSAs are often called triple tax-advantaged.
Why did my federal withholding change when my pay did not?
Withholding is recalculated every pay period from annualized wages, so anything that changes the projection — a bonus, a new W-4, a second job noted in Step 2, or the IRS releasing new-year brackets — shifts the amount. Withholding is only an estimate of your real tax; the annual return settles the difference.
Is overtime taxed at a higher rate?
No. Overtime dollars are taxed like any other wages. A check with overtime can be withheld more heavily because the payroll system annualizes that larger check, but at filing time everything lands in the same brackets — the extra withholding comes back as a refund if it overshot.
Related tools
Paycheck Calculator · California Paycheck · Texas Paycheck · New York Paycheck · Salary to Hourly
2026 figures are estimates based on IRS and SSA announcements; actual withholding depends on your W-4 and employer. Not tax or legal advice.