What Is Payroll Withholding? Types, Deductions, and Garnishments

Payroll withholding is the money your employer subtracts from your gross pay each pay period before depositing what’s left into your account. It covers three kinds of items: mandatory taxes required by law, voluntary deductions you’ve signed up for, and court-ordered garnishments tied to certain debts. The gap between your gross pay and your net pay is the sum of everything in those three buckets.

Federal Income Tax

Federal law requires every employer to deduct income tax from your wages each pay period.¹ The amount isn’t a flat percentage. It depends on your filing status, the dependents you claim, and how much you earn. Your employer plugs your pay and your W-4 selections into IRS withholding tables to calculate the right figure for each check.

Because the federal income tax is progressive, higher portions of your income are taxed at higher rates. Spreading the collection across the year keeps you from facing one large bill in April. Everything withheld during the year counts as a credit against what you actually owe when you file. If too much came out, you get a refund. If too little came out, you owe the difference, and the IRS charges interest on underpayments.²

Bonuses and Other Supplemental Wages

Bonuses, commissions, and severance pay are handled differently from your regular salary. When your employer pays them separately, they can apply a flat 22% federal withholding rate rather than running the payment through the standard tables. If your supplemental wages for the calendar year exceed $1 million, the amount above that threshold is withheld at 37%, the top marginal rate.³

Social Security and Medicare

Beyond income tax, your employer withholds Social Security and Medicare taxes, together called FICA. These are flat rates that fund retirement, disability, and healthcare benefits.

Social Security: 6.2% of your wages, up to an annual earnings cap of $184,500 in 2026. Once you hit that cap, no more Social Security tax is withheld for the rest of the year.⁴⁵
Medicare: 1.45% of all wages, with no cap.⁴
Additional Medicare Tax: an extra 0.9% once your wages pass $200,000 for single filers or $250,000 for married filing jointly. Your employer starts withholding this automatically when your pay for the year exceeds $200,000, regardless of your filing status.⁶

Your employer pays a matching 6.2% and 1.45% from its own funds.⁷ That match doesn’t come out of your check, but it’s part of the total cost of employing you. Your share must be deducted from your wages at the time of payment.⁸

State and Local Taxes

Most states also require employers to withhold state income tax. Rates vary widely. A handful of states impose no individual income tax, while others reach into the low double digits. If you work in a city or county with its own income tax, that comes out on top of federal and state.

A small number of states and territories also require payroll deductions for disability insurance or paid family leave. These programs are funded by employee contributions that typically run from a fraction of a percent to just over 1% of wages. When your state has one, it shows up as a separate line on your pay stub.

Voluntary Deductions You Signed Up For

Your paycheck may also reflect deductions you chose: retirement contributions, health insurance premiums, flexible spending accounts, and similar benefits. These split into two categories based on when tax applies.

Pre-Tax Deductions

Pre-tax deductions come out before federal income tax (and often FICA) is calculated, which reduces the wages your tax is figured on. Common examples:

Traditional 401(k) or 403(b) contributions. In 2026, you can contribute up to $24,500. Workers 50 or older get a catch-up that raises the limit to $32,500. Workers aged 60 through 63 get an even higher catch-up of $11,250 above the base, for a total of $35,750.⁹
Health Savings Account contributions. With a qualifying high-deductible health plan, you can contribute up to $4,400 for self-only coverage or $8,750 for family coverage in 2026.¹⁰
Section 125 cafeteria plan benefits. Many employers let you pay health insurance premiums, dependent care, and adoption assistance with pre-tax dollars.¹¹

Since these come out before tax, each dollar you contribute reduces your take-home pay by less than a dollar.

Post-Tax Deductions

Post-tax deductions come out after taxes have been calculated, so they don’t lower your current taxable income. The main example is a Roth 401(k) contribution: you pay tax on that money now, and qualified withdrawals in retirement, including investment growth, come out tax-free.¹² Supplemental life insurance, disability premiums, and union dues are also usually post-tax.

Wage Garnishments

If you owe certain debts, a court or government agency can order your employer to redirect part of your pay to the creditor. Wage garnishments aren’t optional once the order is served. Common triggers include unpaid child support, defaulted federal student loans, and IRS levies for back taxes.¹³

Federal law caps garnishments for ordinary consumer debts. The maximum is the lesser of two figures: 25% of your disposable earnings for the week, or the amount by which your weekly disposable earnings exceed $217.50 (which is 30 times the $7.25 federal minimum wage).¹⁴ So if your weekly disposable earnings are $400, the garnishment could not exceed $100, because 25% of $400 is less than $182.50 ($400 minus $217.50). Garnishments for child support and federal tax debts can take larger percentages under separate rules.

When multiple garnishment orders reach the same employer, child support and alimony take priority over other garnishments regardless of when they were served.¹³ Beyond that, the ordering rules vary by jurisdiction.

How to Change What’s Withheld

The federal income tax portion of your withholding is driven by IRS Form W-4, the Employee’s Withholding Certificate.¹⁵ You fill it out when you start a job, and you can file a revised version any time your situation changes. The key inputs:

Filing status. Single, married filing jointly, or head of household. This sets which tax brackets and standard deduction your employer applies.¹⁶
Dependents. You can claim a $2,200 credit for each qualifying child under 17 and a $500 credit for other dependents, which lowers the amount taken from each check.¹⁶
Other income and deductions. A second job, freelance income, or plans to itemize can all be reflected on the form to push withholding up or down.¹⁶

If you had no federal income tax liability last year and expect none this year, you can claim exempt on the W-4, and no federal income tax will be withheld.¹⁶ FICA still applies regardless of that exemption.

The IRS offers a free Tax Withholding Estimator online that walks through your income, deductions, and credits to recommend W-4 settings.¹⁷ Running it after a major change, such as a new job, a marriage, a new child, or a big income shift, is the simplest way to keep your withholding aligned with what you’ll actually owe.

1
Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source
2
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
3
Internal Revenue Service. Publication 15 (2026), Employer’s Tax Guide
4
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
5
Social Security Administration. Contribution and Benefit Base
6
Internal Revenue Service. Additional Medicare Tax
7
Office of the Law Revision Counsel. 26 USC 3111 – Rate of Tax
8
Office of the Law Revision Counsel. 26 USC 3102 – Deduction of Tax From Wages
9
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
10
Internal Revenue Service. Notice 2026-05 – Expanded Availability of Health Savings Accounts
11
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
12
Investor.gov. Traditional and Roth 401(k) Plans
13
U.S. Department of Labor. Fact Sheet #30 – Wage Garnishment Protections of the Consumer Credit Protection Act
14
Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment
15
Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate
16
Internal Revenue Service. Form W-4 (2026) Employee’s Withholding Certificate
17
Internal Revenue Service. Tax Withholding Estimator