What Gets Subtracted From Your Paycheck

Your employer withholds payroll taxes from each paycheck based on information you provide on your W-4 form and your gross pay — the total amount you earn before any deductions. The taxes withheld are federal income tax, Social Security tax (6.2% of gross pay), and Medicare tax (1.45% of gross pay). Some states and cities also withhold income tax. Your employer sends these amounts to the government on your behalf throughout the year.

The calculation starts with your gross pay for that pay period. From that, your employer subtracts Social Security and Medicare taxes first — these are fixed percentages that do not change. Then federal income tax is withheld based on the W-4 information you filled out, which tells your employer how many withholding allowances you claimed. State and local taxes, if they apply where you work, are calculated separately using your state's or city's tax tables.

Key Takeaways

  • Social Security tax is always 6.2% of your gross pay, and Medicare tax is always 1.45%, with no variation based on your W-4.
  • Federal income tax withholding depends on your W-4 form, your pay frequency, and your gross pay — the more allowances you claim, the less is withheld.
  • Your W-4 is not your tax return; it is an estimate you give your employer so they know how much to withhold each pay period.
  • State and local income taxes vary by location and are calculated using tax tables specific to your state or city.
  • You can recalculate your withholding if your life changes — marriage, a second job, dependents, or large refunds or bills at tax time are all reasons to adjust.

How Federal Income Tax Withholding Works

Federal income tax withholding is not a fixed percentage like Social Security and Medicare. Instead, your employer uses IRS tax tables that account for your pay frequency (weekly, biweekly, monthly), your gross pay for that period, and the number of withholding allowances you claimed on your W-4. Each allowance you claim reduces the amount withheld. If you claim zero allowances, more tax is withheld; if you claim many allowances, less is withheld.

The IRS publishes tax withholding tables every year. Your employer's payroll system looks up your pay amount and allowance count in the table for your pay frequency and calculates the federal tax to withhold. This is why two people earning the same gross pay can have different federal tax withholdings — they may have claimed different numbers of allowances based on their personal situation.

The W-4 form asks you to estimate your total tax liability for the year and divide it across your paychecks. If you have a spouse who also works, claim dependents, or have other income, you may need to adjust your allowances so that the right amount is withheld overall. Many people aim to have roughly zero tax owed or a small refund when they file their return in April.

Social Security and Medicare Tax — The Fixed Amounts

Social Security and Medicare taxes are straightforward: they are the same percentage for every worker, every paycheck. Social Security tax is 6.2% of your gross pay, up to a wage limit that changes each year. In 2024, that limit is $168,600, meaning once you earn that much in a calendar year, no more Social Security tax is withheld from your remaining paychecks. Medicare tax is 1.45% of all your gross pay with no wage limit — it is withheld on every dollar you earn.

These percentages do not change based on your W-4, your filing status, or how many dependents you have. They are the same whether you are single, married, or have ten children. Your employer withholds them automatically and sends them to the Social Security Administration and the Centers for Medicare & Medicaid Services. You cannot reduce or eliminate these withholdings by changing your W-4.

If you earn more than $200,000 as a single filer (or $250,000 married filing jointly), an additional 0.9% Medicare tax is withheld on the income above that threshold. This is separate from the standard 1.45% and is also automatic.

State and Local Income Tax Withholding

Not all states have income tax, and not all cities tax wages. If you live and work in a state or city that does, your employer will withhold state or local income tax in addition to federal tax. Each state and city has its own tax rates and rules. Some states use a flat percentage; others use tax brackets similar to the federal system. Some require you to fill out a state W-4 form; others do not.

Your payroll stub should show state and local taxes withheld separately from federal tax. If you move to a new state or city mid-year, or if your state changes its tax law, you may need to update your withholding. Contact your state's department of revenue or your city's tax office to find out what form you need to file and whether your employer is withholding the correct amount.

Some states do not withhold income tax at all — including Florida, Texas, Wyoming, and others. If you work in one of these states, you will see no state income tax line on your payroll stub, but you may still owe state tax if you live in a state that taxes residents on all income, even income earned elsewhere.

How to Read Your Payroll Stub

Your payroll stub (also called a pay stub or earnings statement) shows your gross pay, all deductions, and your net pay — the amount you actually receive. It breaks down federal, state, and local taxes separately, and shows Social Security and Medicare taxes as well. Some stubs also show year-to-date totals, which tell you how much has been withheld so far this year.

To verify your withholding is correct, add up the federal, state, and local taxes shown on your stub for one pay period. Multiply that by the number of pay periods in a year (26 for biweekly, 52 for weekly, 24 for semimonthly, 12 for monthly). That rough total is what you expect to have withheld for the year. When you file your tax return, compare that to your actual tax liability. If you owe money or get a large refund, your withholding is off and you should adjust your W-4.

Your payroll stub also shows any other deductions — health insurance premiums, retirement contributions, child support, wage garnishments — that come out before you receive your net pay. These are separate from taxes and do not affect your tax calculation, though some (like traditional 401(k) contributions) do reduce your taxable income.

When and How to Adjust Your Withholding

You do not have to wait until tax time to fix your withholding. If you get married, have a child, take a second job, or expect a large refund or tax bill, you can fill out a new W-4 and give it to your employer at any time. Your employer must begin using the new withholding the next pay period or within a reasonable time after receiving it.

The IRS provides a withholding calculator on its website (irs.gov) that walks you through your situation and tells you what allowances to claim. You answer questions about your income, dependents, filing status, and whether your spouse works. The calculator estimates your total tax for the year and recommends a withholding strategy. You then fill out a new W-4 with the recommended allowances and submit it to your payroll department.

Common reasons to adjust your withholding include: you got married or divorced; you had a baby or adopted a child; you started or stopped working a second job; your spouse started or stopped working; you expect to owe taxes or get a large refund; or your income changed significantly. Making these adjustments during the year is faster and simpler than dealing with a large bill or refund when you file your return.

Frequently Asked Questions

Why is my federal tax withholding different from my coworker's if we earn the same pay?

Your W-4 forms are different. You may have claimed a different number of allowances, or one of you may have a spouse who works, dependents, or other income that affects your withholding. The W-4 is personal to your situation, so two people with the same gross pay can have very different federal tax withholding.

Can I claim zero allowances to get a bigger refund?

Yes, but it means less money in your paycheck now. Claiming zero allowances maximizes withholding, so more tax comes out each pay period and you are more likely to get a refund in April. However, you are essentially giving the government an interest-free loan of your own money. Most people aim to have withholding close to their actual tax liability so they break even or owe a small amount.

What happens if I do not fill out a W-4?

If you do not provide a W-4, your employer must withhold as if you claimed zero allowances, which is the maximum federal withholding. You should fill out a W-4 as soon as you start a job so your withholding matches your actual situation.

Do I have to pay Social Security and Medicare tax if I am self-employed?

Yes, but the calculation is different. Self-employed people pay both the employee and employer portions of Social Security and Medicare tax (15.3% total) on net earnings from self-employment. You pay this through self-employment tax when you file your tax return, not through payroll withholding. You can make estimated tax payments throughout the year to avoid a large bill in April.

If I get a big refund, does that mean I am paying too much in taxes?

A refund means your withholding was higher than your actual tax liability — you paid more than you owed. It is not extra money; it is your own money returned to you. If you want more money in your paycheck now instead of waiting for a refund, you can claim more allowances on your W-4 to reduce withholding.