The taxes on your payslip almost always fall into three groups: federal income tax, Social Security and Medicare (together called FICA), and, in most states, state and sometimes local income tax. Federal income tax is the largest and most variable line because it depends on your earnings and your Form W-4. FICA is easier to check: a flat 6.2% for Social Security and 1.45% for Medicare on your gross wages. Everything else you see on the stub is either a pre-tax benefit that shrinks those taxes, or an after-tax deduction that isn’t a tax at all.
Federal Income Tax Withholding
Federal income tax is usually the biggest chunk missing from your paycheck. Your employer is required to withhold a portion of each check and send it to the IRS on your behalf, based on estimates of what you’ll owe for the year.1Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source It’s your annual tax bill paid in installments instead of in one lump sum in April.
How much comes out depends on two things: how much you earn per pay period and what you put on your Form W-4 when you were hired. Federal income tax uses a progressive rate structure, so only the income within each bracket gets taxed at that bracket’s rate. For 2026, the seven rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. A single filer pays 10% on the first $12,400 of taxable income, then 12% on income between $12,400 and $50,400, and so on up to 37% on income above $640,600.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Married couples filing jointly hit each bracket at roughly double those thresholds.
Your employer doesn’t know your full tax picture, so withholding is always an estimate. Withhold too much over the year, and you get a refund when you file. Withhold too little, and you owe the difference, possibly with a penalty.
Social Security and Medicare (FICA) Taxes
The next two lines on your payslip fund Social Security and Medicare, grouped under “FICA” for the Federal Insurance Contributions Act. Unlike federal income tax, FICA rates are flat and easy to check against your gross pay.
Social Security tax is 6.2% of your gross wages. Medicare tax is 1.45%.3Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax Your employer pays a matching 6.2% and 1.45% on top of what comes out of your check, but the employer share doesn’t show on your payslip.4Internal Revenue Service. Topic No 751, Social Security and Medicare Withholding Rates Combined, 15.3% of every dollar you earn goes into these two programs, split evenly between you and your employer.
Social Security tax has a ceiling. In 2026, only the first $184,500 of your earnings is subject to the 6.2% rate.5Social Security Administration. Contribution and Benefit Base Once your year-to-date wages cross that threshold, Social Security withholding stops and your net pay jumps for the rest of the year. Medicare tax has no cap and applies to every dollar you earn.
High earners face an additional charge. If your wages exceed $200,000 in a calendar year, your employer must begin withholding an Additional Medicare Tax of 0.9% on everything above that threshold.4Internal Revenue Service. Topic No 751, Social Security and Medicare Withholding Rates Your employer does not match this one.
State and Local Income Taxes
Depending on where you live and work, your payslip may show separate withholdings for state and local income taxes. Most states levy their own income tax on wages, though a handful of states have no income tax at all, and residents there keep a larger share of each paycheck. Among states that do tax income, some use a progressive bracket system similar to the federal structure; others apply a single flat rate to all earnings.
Local taxes add another layer. Some cities and counties impose their own income or wage taxes, which appear as separate line items funding services like public schools, fire departments, and local infrastructure. Individually the rates are usually small, but they add up. If you live in one city and commute to another, you may see withholdings for both jurisdictions, though many neighboring areas have reciprocity agreements that prevent double taxation.
How Pre-Tax Deductions Reduce the Taxes Withheld
Not everything subtracted from your paycheck is a tax, and some of the non-tax deductions actually shrink the taxes on the lines above. Pre-tax benefits come out of your gross pay before federal income tax, Social Security tax, and Medicare tax are calculated. If your federal withholding looks lower than the bracket math suggests, pre-tax deductions are usually why.
Traditional 401(k) contributions are the most common example. Money you send to a traditional 401(k) comes out before federal income tax is calculated, lowering your current taxable wages. In 2026, you can contribute up to $24,500 per year, or $32,500 if you’re 50 or older. Workers aged 60 through 63 get a higher catch-up limit of $11,250, bringing their maximum to $35,750.6Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 A Roth 401(k) works differently: contributions come out after taxes, so they won’t reduce your current withholding, but the money grows tax-free for retirement.
Health insurance premiums, flexible spending accounts, and dependent care accounts typically run through a cafeteria plan under Section 125 of the tax code. Salary reductions sent into these plans are not treated as wages for federal income tax purposes and are generally exempt from FICA taxes as well.7Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans Every dollar you put toward qualifying health or dependent care benefits through your employer lowers the wage base your taxes are calculated on.
Fixing Withholding That’s Too High or Too Low
Your employer calculates federal income tax withholding from IRS Form W-4, the Employee’s Withholding Certificate.8Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate You fill it out at hire, but you can submit an updated one any time your circumstances change.
The current W-4 has five steps. Step 1 collects your name, Social Security number, and filing status. Step 2 applies if you or your spouse hold multiple jobs. Step 3 captures tax credits for dependents: $2,200 per qualifying child under 17 and $500 per other dependent. Step 4 handles other adjustments, including additional non-job income, itemized deductions above the standard deduction, and any flat extra amount you want withheld each pay period. Step 5 is your signature.9Internal Revenue Service. Form W-4, Employee’s Withholding Certificate (2026)
When you submit a revised W-4, the IRS requires your employer to implement the changes no later than the first payroll period ending 30 or more days after receiving the form.10Internal Revenue Service. Topic No 753, Form W-4, Employees Withholding Certificate Most payroll systems process it within one to two pay cycles. Check your next couple of payslips to confirm the federal withholding line has shifted.
If you’re unsure whether your current withholding is on track, the IRS offers a free Tax Withholding Estimator that compares your projected tax liability to what’s being withheld and tells you whether to adjust. It can generate a pre-filled W-4 you can print and give to your employer.11Internal Revenue Service. Tax Withholding Estimator The IRS recommends checking it every January and again after major life events like marriage, a new child, or buying a home.
What Happens If You Get It Wrong
Over-withholding means you’ve handed the government an interest-free loan for the year. You get the money back as a refund, but those dollars could have been earning interest or paying down debt in the meantime. Some people prefer a refund as forced savings; the trade-off is worth knowing.
Under-withholding is where real trouble starts. If you owe more than $1,000 when you file, the IRS may charge an underpayment penalty. You avoid the penalty if your withholding covered at least 90% of your current year’s tax bill or 100% of what you owed the prior year, whichever is less. If your adjusted gross income exceeded $150,000 the prior year, that 100% threshold rises to 110%.12Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty These safe harbor rules give you a concrete target if your income moves around year to year.
Other Lines on Your Payslip
Not every deduction is a tax. A handful of states require payroll deductions for state disability insurance or paid family leave, typically ranging from roughly half a percent to just over one percent of wages, and these show up as their own line items. After-tax benefit deductions such as supplemental life insurance or Roth retirement contributions round out what you might see. Court-ordered wage garnishments for consumer debt appear on some payslips and are capped at 25% of your disposable earnings under federal law.13Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment
One thing worth knowing: no federal law requires your employer to give you a pay stub at all. The Fair Labor Standards Act requires employers to keep accurate payroll records, but handing those records to you isn’t part of the mandate.14U.S. Department of Labor. Fair Labor Standards Act Advisor Pay stub rules come from state law, and most states require employers to show gross pay, net pay, and a description of each deduction. If yours doesn’t provide payslips, your state labor department is where to file a complaint.
If a withholding line on your stub ever doesn’t match what turns up on your W-2, flag it right away. As an employee you generally get credit for taxes withheld from your pay even if your employer didn’t forward the money to the IRS, and the agency pursues the employer rather than you.15Office of the Law Revision Counsel. 26 USC 3102 – Deduction of Tax From Wages Waiting until filing season to notice the mismatch just limits your options.