Understanding Your Paycheck
Your paycheck is more than just a number on a bank statement. Between your gross salary and the amount that actually hits your account, several mandatory deductions take their share. Understanding these deductions helps you plan your budget, negotiate salary offers, and make informed decisions about retirement contributions and other pre-tax benefits.
When you receive a job offer quoting an annual salary, your actual take-home pay will be significantly less. For most Americans, total deductions consume between 25% and 40% of gross pay depending on income level, filing status, and state of residence. This calculator breaks down every component so you can see exactly where each dollar goes.
Federal Income Tax Brackets (2025)
The United States uses a progressive federal income tax system, meaning different portions of your income are taxed at different rates. For tax year 2025, the brackets are as follows.
For single filers, the first \$11,925 of taxable income is taxed at 10%. Income between \$11,925 and \$48,475 is taxed at 12%. The 22% bracket covers income from \$48,475 to \$103,350. The 24% bracket applies from \$103,350 to \$197,300. Income between \$197,300 and \$250,525 is taxed at 32%. The 35% rate applies from \$250,525 to \$626,350, and anything above \$626,350 is taxed at 37%.
For married couples filing jointly, these thresholds are roughly doubled. The 10% bracket covers the first \$23,850, the 12% bracket runs from \$23,850 to \$96,950, and so on through the higher brackets.
A common misconception is that moving into a higher tax bracket means all of your income is taxed at the higher rate. In reality, only the income within each bracket is taxed at that bracket's rate. This is why your effective tax rate is always lower than your marginal tax rate.
Before applying these brackets, your gross income is reduced by the standard deduction. For 2025, the standard deduction is \$15,000 for single filers, \$30,000 for married filing jointly, and \$22,500 for head of household. This means a single filer earning \$75,000 only pays federal tax on \$60,000 of taxable income.
FICA Taxes: Social Security and Medicare
FICA stands for the Federal Insurance Contributions Act. These are payroll taxes that fund Social Security and Medicare, two of the largest federal programs.
Social Security tax is assessed at a flat rate of 6.2% on wages up to the annual wage base limit, which is \$168,600 for 2025. Once your cumulative earnings for the year exceed this threshold, no additional Social Security tax is withheld from your remaining paychecks. Your employer also pays a matching 6.2%, bringing the total Social Security contribution to 12.4% of covered wages.
Medicare tax is assessed at 1.45% on all wages with no cap. Unlike Social Security, there is no upper limit on Medicare-taxable earnings. Additionally, high earners pay an extra 0.9% Additional Medicare Tax on wages exceeding \$200,000 for single filers or \$250,000 for married filing jointly. This additional tax is only paid by the employee and is not matched by the employer.
Together, FICA taxes represent 7.65% of most workers' gross pay, making them the second-largest deduction after federal income tax for many Americans.
State Income Taxes
State income tax rates vary dramatically across the United States. Nine states have no state income tax at all: Alaska, Florida, Nevada, New Hampshire (on wages), South Dakota, Tennessee, Texas, Washington, and Wyoming. On the other end of the spectrum, California's top marginal rate reaches 13.3%.
Many states use a progressive bracket system similar to the federal government, while others impose a flat rate on all income. This calculator uses a flat state tax rate for simplicity, which works well for flat-tax states and provides a reasonable estimate for progressive-tax states when you use your effective state rate.
If you live in a state with no income tax, simply set the state tax rate to 0%. If your state uses progressive brackets, you can look up your effective state tax rate from last year's return and enter that percentage for a more accurate estimate.
Pre-Tax Deductions
Pre-tax deductions reduce your taxable income, effectively giving you a tax break on those contributions. Common pre-tax deductions include traditional 401(k) contributions, 403(b) contributions for nonprofit employees, Health Savings Account (HSA) contributions, Flexible Spending Account (FSA) contributions, and certain insurance premiums.
For example, if you earn \$75,000 and contribute \$500 per paycheck to a traditional 401(k) on a biweekly schedule, your annual pre-tax deductions total \$13,000. This reduces your federal taxable income to \$62,000 before the standard deduction is applied, potentially saving you thousands of dollars in taxes each year.
The 2025 contribution limit for 401(k) plans is \$23,500 for those under 50, with an additional \$7,500 catch-up contribution allowed for those 50 and older. HSA limits are \$4,300 for individual coverage and \$8,550 for family coverage.
Worked Example
Consider a single filer in Texas (no state income tax) earning \$85,000 per year, paid biweekly, with \$200 per paycheck going to a 401(k).
First, calculate the annual pre-tax deductions: \$200 multiplied by 26 pay periods equals \$5,200. The federal taxable income is \$85,000 minus the \$15,000 standard deduction minus the \$5,200 in pre-tax deductions, which equals \$64,800.
Federal tax on \$64,800 is calculated bracket by bracket: 10% on the first \$11,925 (\$1,192.50), 12% on the next \$36,550 (\$4,386.00), and 22% on the remaining \$16,325 (\$3,591.50). Total federal tax is \$9,170.00 annually, or about \$352.69 per paycheck.
Social Security is 6.2% of \$85,000, which equals \$5,270.00 annually or \$202.69 per paycheck. Medicare is 1.45% of \$85,000, totaling \$1,232.50 annually or \$47.40 per paycheck. With no state tax and the \$200 per paycheck 401(k) deduction, the biweekly take-home pay is approximately \$2,466.45.
The effective federal tax rate in this example is about 10.79%, and the total effective tax rate including FICA is about 18.44%.
Frequently Asked Questions
**How accurate is this calculator?** This calculator provides a solid estimate based on standard deduction amounts and published 2025 tax brackets. Your actual paycheck may differ due to itemized deductions, tax credits, additional withholding allowances, local taxes, or employer-specific deductions like health insurance premiums.
**Does this include employer-paid taxes?** No. Your employer pays a matching 6.2% Social Security tax and 1.45% Medicare tax on your behalf, plus federal and state unemployment taxes. These costs are borne by the employer and do not appear on your pay stub.
**What about overtime, bonuses, or commissions?** This calculator assumes a fixed annual salary. Supplemental wages like bonuses are often subject to a flat 22% federal withholding rate, which may differ from your regular marginal rate.
**Should I use this for tax planning?** This tool provides estimates for budgeting and salary comparison purposes. For actual tax planning, consult a qualified tax professional or use IRS resources like the Tax Withholding Estimator.
**What if I have multiple jobs?** If you hold multiple jobs, your combined income may push you into a higher tax bracket. Enter your total combined annual salary for a more accurate estimate of your overall tax burden. Each employer withholds taxes independently, so you may need to adjust your W-4 withholding to avoid underpayment.
**How do I reduce my tax burden?** Maximizing pre-tax deductions like 401(k) and HSA contributions is one of the most effective strategies. Contributing the full \$23,500 to a 401(k) can reduce your federal tax bill by thousands of dollars depending on your bracket. Additionally, tax credits like the Earned Income Tax Credit, Child Tax Credit, and education credits can further reduce your liability.
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