How Paycheck Taxes Work: A Complete US Guide

8 min read · Updated 2026-06-27

If you've ever looked at a job offer of $60,000 and then wondered why your bank account only grows by around $3,800 a month, you're not alone. The gap between the salary you're promised and the money you actually keep comes down to payroll taxes. This guide walks through every tax that comes out of a typical US paycheck, in the order they're applied, so you can understand exactly where your money goes.

The four taxes on almost every US paycheck

For most employees (W-2 workers), four separate taxes are withheld before you're paid:

1. Federal income tax — a progressive tax collected by the IRS.
2. Social Security tax — 6.2% of wages up to an annual limit, part of FICA.
3. Medicare tax — 1.45% of all wages, also part of FICA.
4. State income tax — charged in 41 states and Washington, D.C.

Some workers also see local (city or county) income taxes, state disability insurance, or court-ordered garnishments, but the four above are the universal building blocks.

1. Federal income tax: the progressive piece

Federal income tax is the biggest deduction for most people. It's progressive, which means different slices of your income are taxed at increasing rates. Crucially, moving into a higher tax bracket does not mean your entire income is taxed at that higher rate — only the portion that falls inside the new bracket is.

Before brackets are applied, you subtract the standard deduction (or itemized deductions if larger). For 2025 the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. We cover the exact numbers in our 2025 federal income tax brackets guide.

2 & 3. FICA: Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act. It funds two programs and is a flat tax, not a progressive one:

• Social Security: 6.2% of your wages, but only up to an annual wage base limit ($176,100 in 2025). Earnings above that limit aren't subject to Social Security tax.
• Medicare: 1.45% of all your wages, with no cap. High earners pay an extra 0.9% on income above a threshold.

Combined, FICA is 7.65% of most paychecks. Your employer pays a matching amount on your behalf. For a deeper look, read our FICA explainer.

4. State income tax: it depends where you live

State income tax varies enormously. Some states use progressive brackets like the federal system (California tops out at 13.3%), some charge a single flat rate (Colorado is 4.4%), and nine states charge nothing at all on wages. If you live in Texas, Florida, or another no-tax state, your paycheck only loses federal tax and FICA — see our list of states with no income tax.

Putting it together: a worked example

Imagine a single filer earning $60,000 a year in a state with no income tax. Here's the rough order of operations:

• Social Security: 6.2% × $60,000 = $3,720.
• Medicare: 1.45% × $60,000 = $870.
• Federal income tax: taxable income is $60,000 − $15,000 standard deduction = $45,000, taxed through the 10%, 12%, and 22% brackets for roughly $5,200.

That's about $9,800 in total withholding, leaving roughly $50,200 in take-home pay — around 84% of gross. Add a state income tax and that percentage drops further. Rather than do this math by hand, you can plug your own numbers into our calculator and get an instant breakdown.

Gross pay vs net pay

The figure before any deductions is your gross pay; what's left after every tax is your net pay (or take-home pay). The difference is exactly the sum of the taxes above plus any benefits you pay into. We unpack this distinction fully in gross pay vs net pay.