Understanding Your Paycheck: Federal Tax, FICA, and State Tax Explained
A plain-English breakdown of every line item on a typical US paycheck — federal income tax withholding, Social Security, Medicare, state tax, and pre-tax deductions.
If you’ve ever squinted at a pay stub and wondered where a third of your salary went, you’re not alone. American paychecks have at least four distinct tax withholdings — sometimes eight or more once pre-tax benefits and local taxes are added. This guide walks through every line, what it funds, and how to calculate each yourself.
The four core withholdings on every US paycheck
Every US employee sees the same four lines on their paycheck stub:
- Federal income tax — funds the federal government
- Social Security (part of FICA) — funds retirement and disability benefits
- Medicare (part of FICA) — funds healthcare for seniors
- State income tax — funds your state government (unless you live in a no-tax state)
Let’s break each one down.
1. Federal income tax withholding
Federal income tax is the biggest line item for most workers. It’s calculated using a progressive bracket system — your income is divided into chunks, and each chunk is taxed at a higher rate.
For 2026 (from the IRS inflation adjustments in Revenue Procedure 2025-32), the single-filer brackets are:
| Income range | Rate |
|---|---|
| $0 – $12,400 | 10% |
| $12,400 – $50,400 | 12% |
| $50,400 – $105,700 | 22% |
| $105,700 – $201,775 | 24% |
| $201,775 – $256,225 | 32% |
| $256,225 – $640,600 | 35% |
| $640,600+ | 37% |
A crucial detail: the rate only applies to the chunk in that bracket. A single filer earning $60,000 doesn’t pay 22% on the full amount — they pay 10% on the first $12,400, 12% on the next $38,000, and 22% only on the remaining $9,600.
Your employer withholds federal tax based on the W-4 form you filed when hired. The W-4 tells them your filing status, number of dependents, and any additional withholding you want. If your W-4 is out of date (after a marriage, divorce, or new child), your withholding will be wrong — update it immediately.
Standard deduction reduces what’s taxed
Before any tax brackets apply, you subtract the standard deduction — $16,100 (single) or $32,200 (married filing jointly) in 2026. Someone earning $60,000 with the standard deduction only has $43,900 in taxable income, drastically reducing the federal tax owed.
2. Social Security (FICA)
FICA stands for Federal Insurance Contributions Act. It has two parts — Social Security and Medicare — and it’s where “OASDI” on your pay stub comes from.
Social Security withholding is 6.2% of your wages, capped at the annual wage base ($184,500 projected for 2026). Earn $200,000? You pay Social Security on the first $184,500 and nothing on the extra $15,500.
Your employer pays a matching 6.2% — so 12.4% of every wage dollar up to the cap goes to Social Security.
Self-employed workers pay both halves themselves — 12.4% total. This is why solo freelancers get sticker shock on their first tax return.
3. Medicare (FICA)
Medicare is uncapped. You pay 1.45% on every dollar of wages, forever. No wage base limit.
High earners pay a little extra: Additional Medicare of 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly). Your employer withholds this automatically once you hit the threshold.
Employers also match the 1.45% — total Medicare funding is 2.9% of all US wages (plus an extra 0.9% from high earners).
4. State income tax
Here’s where it gets interesting. The US has three state tax systems:
- No-tax states (9 of them) — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. You pay $0 in state income tax.
- Flat-tax states — Everyone pays the same rate. Examples: Pennsylvania (3.07%), Colorado (4.4%), Illinois (4.95%), North Carolina (4.25%), Arizona (2.5%), Georgia (5.39%).
- Progressive-tax states — Bracket systems like the federal one. California runs from 1% to 12.3%. New York from 4% to 10.9%. Oregon from 4.75% to 9.9%.
To see how your specific state taxes your paycheck, use our state calculators — we cover all 50 states plus DC with current 2026 rates.
Beyond the core four: other deductions you might see
Depending on your employer and benefits enrollment, your pay stub may also show:
- Pre-tax 401(k) / 403(b) — reduces federal taxable wages (but NOT FICA wages). In most states it reduces state taxable wages too — except in Pennsylvania and New Jersey, which don’t conform.
- Pre-tax health insurance (Section 125 / cafeteria plan) — reduces both federal taxable AND FICA wages. That’s why it’s often the most valuable pre-tax benefit.
- HSA / FSA contributions — similar to Section 125, reduces both federal and FICA.
- Post-tax Roth 401(k) — no immediate tax benefit; money goes in already-taxed.
- State Disability Insurance — California (1.2%), New Jersey, New York, Rhode Island, Hawaii have employee-paid SDI.
- Local / city income tax — New York City, most of Pennsylvania, Ohio municipalities, Kentucky cities, and Maryland counties add 0.5–4% on top of state tax.
- Union dues, garnishments, child support — court-ordered or elected withholdings.
A worked example
Let’s take a single filer in California earning $85,000/year, contributing 5% to a traditional 401(k), with a $2,400/year pre-tax health premium.
- Gross annual: $85,000
- Pre-tax health: −$2,400 → FICA wages: $82,600
- Pre-tax 401(k): −$4,250 → combined federal taxable wages: $78,350
- Standard deduction: −$16,100 → federal taxable income: $62,250
- Federal income tax: $6,922 (using 2026 brackets)
- Social Security (6.2% of $82,600): $5,121
- Medicare (1.45% of $82,600): $1,198
- California state tax (after $5,540 CA standard deduction): ~$3,500
- California SDI (1.2% of $82,600): $991
Total withholdings: about $17,732 federal + $4,491 state = $22,223 Take-home (after 401(k) and health): $85,000 − $22,223 − $4,250 − $2,400 = $56,127 per year (~$4,677/month)
Want to try your own numbers? Our California paycheck calculator does this math in real time with a donut chart breakdown.
Why this matters
Understanding your paycheck changes how you make decisions:
- Salary negotiations — a $10K raise becomes $6,500–$7,500 in-hand after taxes, not $10K.
- Job offers across states — $90K in California ≠ $90K in Texas; run both through a calculator before saying yes.
- Retirement contributions — each extra 1% into 401(k) saves you your marginal rate × the contribution in current taxes.
- Spousal tax planning — married-filing-jointly thresholds are double single ones, but high earners may hit the “marriage penalty” in higher brackets.
The more clearly you see every line, the better financial decisions you make.