What Are Employee Taxes: FICA, Federal, State, and W-4

Employee taxes are the amounts your employer subtracts from each paycheck before the money reaches you: federal income tax, Social Security and Medicare contributions (together called FICA), and in most places state or local income tax. This pay-as-you-go setup spreads your annual tax bill across the year so nothing enormous lands in April. What actually comes out depends on how much you earn, where you live, and what you told your employer on Form W-4.

Federal Income Tax

Federal income tax is progressive, which means each additional dollar you earn can be taxed at a higher rate than the last. For 2026, the brackets are:

10% on income up to $12,400 for single filers ($24,800 for married filing jointly)
12% on income over $12,400 ($24,800 jointly)
22% on income over $50,400 ($100,800 jointly)
24% on income over $105,700 ($211,400 jointly)
32% on income over $201,775 ($403,550 jointly)
35% on income over $256,225 ($512,450 jointly)
37% on income over $640,600 ($768,700 jointly)

Moving into a higher bracket does not push all your income to that rate. Only the dollars inside each range get taxed at that range’s rate. A single filer earning $60,000 pays 10% on the first $12,400, 12% on the slice from there up to $50,400, and 22% only on what sits above $50,400.¹

Your employer does not wait until December to sort this out. Each pay period, the payroll system projects your annual income from your current wages and W-4 information and withholds a proportional share. A raise, bonus, or job change mid-year automatically shifts the math from that point on.

Social Security and Medicare (FICA)

The Federal Insurance Contributions Act requires both you and your employer to fund Social Security and Medicare. These deductions appear as their own lines on your pay stub, separate from income tax.

Social Security

You pay 6.2% of your wages toward Social Security, and your employer matches with another 6.2%.² This tax applies only to the first $184,500 you earn in 2026. Once your year-to-date wages cross that threshold, Social Security withholding stops for the rest of the calendar year, and your take-home pay ticks up.³

Medicare

Medicare takes 1.45% from your wages, matched by another 1.45% from your employer. There is no wage cap. Every dollar you earn is subject to Medicare tax.²

Additional Medicare Tax on High Earners

An extra 0.9% Medicare tax applies to wages above certain thresholds. Your employer begins withholding it once your pay crosses $200,000 in a calendar year, regardless of your filing status, and there is no employer match on this portion.² The thresholds that determine what you actually owe when you file depend on your filing status:

Married filing jointly: $250,000
Married filing separately: $125,000
Single and all other filers: $200,000

Because employers use the flat $200,000 trigger for withholding but your real liability follows your filing status, you may owe additional tax at filing or get some back. A married couple filing jointly does not owe the surtax until combined wages exceed $250,000, even though each employer starts withholding at $200,000 on that individual’s paycheck.⁴

State and Local Income Taxes

Most states collect their own income tax on top of federal. Some use a flat rate, others use progressive brackets, and nine states impose no income tax on wages at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Two workers with identical salaries can take home noticeably different amounts based on nothing more than where they live.

If you live in one state and work in another, you could technically owe income tax in both. Many neighboring states have reciprocity agreements: you file only in your home state, and your employer withholds accordingly. Without such an agreement, you generally file in both and claim a credit in your home state for tax paid to the work state.

Some cities and counties layer their own income or payroll tax on top of state taxes, common in parts of Ohio, Pennsylvania, and New York, with rates typically running from around 1% to 3% of wages. A few states also fund disability insurance or paid family leave through separate payroll deductions, generally below 1.5% of wages.

Pre-Tax Deductions That Shrink Your Taxable Wages

Before income tax withholding gets calculated, certain voluntary deductions come out of your gross pay. These pre-tax deductions reduce the income that gets taxed, lowering your federal income tax and, in many cases, your FICA taxes for that pay period.

Common pre-tax deductions include employer-sponsored health, dental, and vision premiums; traditional 401(k) or 403(b) contributions (Roth contributions are post-tax); health savings account contributions if you have a high-deductible health plan; and flexible spending accounts for healthcare or dependent care.

This is where pay stubs get confusing. Your gross pay and the wages your employer actually taxes can be two different numbers. Contribute $500 per paycheck to a traditional 401(k), and your taxable wages for that period drop by $500 before withholding runs. Over a year, that difference is real money off your tax bill.

How Your Employer Decides What to Withhold

Form W-4

Your employer sets federal income tax withholding based on Form W-4, the Employee’s Withholding Certificate. You fill it out when you start a job, and it asks for your filing status, how many qualifying dependents you have, and whether other income or deductions should adjust the number.⁵

Never submit one, and your employer must withhold as though you are single with no adjustments, which usually pulls more than necessary.⁶ You can download the form from the IRS or request one from payroll or HR at any time.⁷

If you hold multiple jobs or your spouse also works, the W-4 has a worksheet to split withholding across employers so you don’t underpay. Skipping that step is one of the most common reasons people owe a surprise balance at tax time.

The Standard Deduction’s Role

Payroll systems bake the standard deduction into their withholding math. For 2026, that deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.¹ Income tax is not withheld on the slice of wages the deduction covers.

Update After Life Changes

Getting married, having a child, buying a home, or picking up a second job changes your tax picture. A revised W-4 after any of these keeps your withholding accurate. Too little means a bill and possibly a penalty; too much means you loaned the government money at 0% for a year.⁵

Reading Your Pay Stub

Your pay stub is the receipt for everything above. It shows gross pay, each deduction, and your net take-home. Federal income tax, Social Security, and Medicare are the lines most people spot first. Look for state and local taxes, any pre-tax benefit deductions, and post-tax items like Roth 401(k) contributions or wage garnishments as well.

Check the year-to-date columns now and then, not just the current period. If year-to-date Social Security withholding exceeds your 6.2% share of $184,500 (a maximum of $11,439 for 2026), something is wrong, often because you changed jobs mid-year and both employers restarted the count from zero. Claim the excess as a credit on your tax return.³

If You Are Self-Employed Instead

Freelance work, side businesses, and gig platforms do not run through employer payroll, so there is no FICA line on a pay stub. You owe the whole 15.3% yourself: 12.4% for Social Security and 2.9% for Medicare.⁸ The Social Security portion still stops at the $184,500 wage base, combining any W-2 wages with your self-employment income.³

You can deduct the employer-equivalent half (7.65%) when computing your adjusted gross income. The cash still leaves your account first, which catches many first-time freelancers off guard. If you have both a regular job and self-employment income, your W-2 wages count toward the Social Security cap first.

Avoiding an Underpayment Penalty

The IRS expects tax to be paid throughout the year, not in one April payment. Too little withholding, or unreported self-employment income, can trigger an underpayment penalty. You generally avoid it by meeting one of these safe harbors:

You owe less than $1,000 after subtracting withholding and credits.
You paid at least 90% of your current-year tax liability through withholding and estimated payments.
You paid at least 100% of your prior-year tax liability (110% if your adjusted gross income exceeded $150,000, or $75,000 if married filing separately).

Most people rely on the prior-year safe harbor, because it does not require predicting this year’s income.⁹

If withholding alone cannot cover what you owe, common with significant investment, rental, or self-employment income, you make quarterly estimated tax payments. For the 2026 tax year, those are due April 15, June 15, and September 15, 2026, and January 15, 2027. Filing your 2026 return and paying the balance by February 1, 2027 lets you skip that final January installment.¹⁰

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
3
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
4
Internal Revenue Service. Topic No. 560, Additional Medicare Tax
5
Internal Revenue Service. Form W-4, Employee’s Withholding Certificate
6
Internal Revenue Service. FAQs on the 2020 Form W-4
7
Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate
8
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
9
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
10
Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals