Your take-home pay is your gross pay minus federal income tax, Social Security tax, Medicare tax, and any state or local taxes your employer withholds

The amount you see in your bank account is smaller than your salary because your employer removes taxes before you get paid. These withholdings are not optional — they are required by law. The size of your paycheck depends on your gross salary, how many dependents you claim, your filing status, and whether you live in a state that collects income tax.

Most people do not know exactly how much will be withheld until they see their first paycheck. The withholding amount changes if you get married, have a child, take a second job, or change your W-4 form at work. Understanding what comes out and why helps you plan a budget and spot mistakes on your pay stub.

Key Takeaways

  • Federal income tax, Social Security tax (6.2%), and Medicare tax (1.45%) are withheld from every paycheck, plus any state or local income tax your location requires.
  • The amount of federal income tax withheld depends on the W-4 form you fill out when you start a job, which asks about dependents and filing status.
  • Your pay stub shows gross pay, each tax withheld, and net pay — the amount actually deposited to your account.
  • You can change your withholding by submitting a new W-4 to your employer, which takes effect on your next paycheck.
  • If too much tax is withheld, you get a refund when you file your tax return; if too little, you owe money.

The taxes that come out of every paycheck

Federal income tax is the largest withholding for most people. The amount depends on your W-4 form, which you complete when hired. The W-4 asks your filing status (single, married, head of household), number of dependents, and whether you have other income. Based on your answers, your employer calculates how much federal tax to remove from each paycheck.

Social Security tax is 6.2% of your gross pay, up to a yearly limit. In 2024, you stop paying Social Security tax once you earn $168,600 in a calendar year. Your employer also pays 6.2% on your behalf — that 12.4% total funds Social Security benefits for retirees and disabled workers.

Medicare tax is 1.45% of your gross pay with no yearly limit. Like Social Security, your employer pays an equal 1.45%. If you earn over $200,000 (single) or $250,000 (married filing jointly), an additional 0.9% Medicare tax is withheld from your pay.

State and local income tax varies by location. Nine states have no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest). Other states range from 1% to over 13%. Some cities, including New York City and Philadelphia, also collect local income tax on top of state tax.

How to read your pay stub

Your pay stub shows three key numbers: gross pay, deductions, and net pay. Gross pay is your salary before anything is removed. Deductions are all the taxes and other amounts withheld. Net pay is what actually goes into your bank account.

The deductions section lists each tax separately. You will see "Federal Income Tax Withheld" or "FIT", "Social Security" or "FICA-SS", "Medicare" or "FICA-Med", and possibly "State Income Tax" or "SIT". Some pay stubs also show voluntary deductions like health insurance premiums, retirement contributions, or union dues, which also reduce your net pay.

If the numbers do not add up or a deduction looks wrong, ask your payroll department to explain it. Common errors include incorrect filing status on your W-4, a second job your employer does not know about, or a name change that was not updated in the system.

Why your withholding might be too high or too low

If you get a large tax refund every year, too much federal tax is being withheld from your paychecks. This means you are giving the government an interest-free loan all year. You can reduce withholding by submitting a new W-4 to your employer and claiming more dependents or adjusting your deductions.

If you owe money when you file your tax return, too little tax was withheld. This can happen if you have a second job, are self-employed, have investment income, or claimed too many dependents on your W-4. You can increase withholding by submitting a new W-4 and claiming fewer dependents.

Life changes trigger withholding adjustments. Getting married, divorced, having a child, or adopting all affect your W-4. The IRS recommends updating your W-4 whenever your situation changes so your withholding stays accurate throughout the year.

Calculating your take-home pay

To estimate your net pay, start with your gross salary and subtract the taxes listed above. For example, if you earn $50,000 per year as a single filer in a state with no income tax:

  • Gross annual pay: $50,000
  • Social Security tax (6.2%): $3,100
  • Medicare tax (1.45%): $725
  • Federal income tax (varies by W-4): roughly $4,000 to $5,500
  • Estimated net pay: $40,675 to $42,175

This is an estimate because federal income tax withholding depends on your specific W-4 entries and pay frequency. Biweekly paychecks are calculated differently than monthly or weekly paychecks. Online paycheck calculators can give you a closer estimate if you enter your W-4 information, but your actual pay stub is the only definitive source.

If you have a second job, freelance income, or investment income, your withholding may not cover all the tax you owe. In that case, you might need to make estimated tax payments or adjust your W-4 to withhold extra from your main job.

What to do if your withholding is wrong

If you want to change how much tax is withheld, fill out a new Form W-4 and give it to your payroll or human resources department. You do not need your employer's permission — you can submit a new W-4 anytime. The change takes effect on your next paycheck, usually within one or two pay periods.

The IRS provides a withholding calculator on its website (irs.gov) to help you figure out what to claim on your W-4. You enter your income, filing status, number of dependents, and other income sources, and it tells you what to claim to get closer to zero refund or owed amount.

Keep a copy of any W-4 you submit for your records. If you change jobs, you will need to fill out a new W-4 at your new employer — your previous W-4 does not transfer.

Frequently Asked Questions

Why is my paycheck smaller than I expected?

Federal income tax, Social Security tax, Medicare tax, and possibly state or local income tax are all withheld before you get paid. Together, these typically reduce your paycheck by 20% to 30% depending on your salary, location, and W-4 entries. Your pay stub shows exactly what was removed.

Can I stop taxes from being withheld?

No. Federal income tax, Social Security tax, and Medicare tax are required by law and cannot be avoided. You can adjust how much federal income tax is withheld by changing your W-4, but you cannot eliminate it entirely unless you have no tax liability for the year.

What does "claiming dependents" on my W-4 mean?

Claiming dependents tells your employer to withhold less federal income tax because you have people (children, spouse, or other relatives) who depend on your income. More dependents claimed means less tax withheld per paycheck. You claim the same dependents on your W-4 and your tax return.

Do I get back the Social Security and Medicare taxes I paid?

No. Social Security and Medicare taxes fund those programs and are not refunded. You receive Social Security benefits later in retirement based on how much you paid in. Medicare taxes fund your Medicare coverage at age 65.

How do I know if I should claim zero or one on my W-4?

The IRS withholding calculator on irs.gov asks questions about your income, filing status, and dependents and tells you what to claim. If you want a refund at tax time, claim fewer dependents. If you want a bigger paycheck now, claim more — but you may owe money later.