How to Calculate Your Paycheck
Net pay = Gross pay − federal income tax − state income tax − FICA (Social Security + Medicare) − pre-tax deductions (401k, HSA) − other deductions.
Common Paycheck Deductions
| Deduction | Rate | Notes |
|---|---|---|
| Federal Income Tax | 10–37% | Progressive; 2025 brackets apply to taxable income after deductions |
| Social Security | 6.2% | Stops at $176,100 wage base (2025) |
| Medicare | 1.45% | No cap; add 0.9% if income >$200k (single) |
| State Income Tax | 0–13.3% | Varies by state; 9 states have no income tax |
| 401(k) Traditional | Up to you | 2025 limit $23,500; reduces federal & state taxable income |
| Health Insurance | Varies | Employer-sponsored premiums paid pre-tax reduce taxable income |
2025 Federal Tax Brackets (Single)
- 10%: up to $11,925
- 12%: $11,926–$48,475
- 22%: $48,476–$103,350
- 24%: $103,351–$197,300
- 32%: $197,301–$250,525
- 35%: $250,526–$626,350
- 37%: over $626,350
W-4 & Withholding Strategy
Adjusting your W-4 controls how much is withheld each paycheck. Over-withholding means you’re giving the government an interest-free loan; under-withholding risks a tax bill plus penalties. Aim for a small refund or a small amount owed. Claim dependents on your W-4 to reduce withholding if eligible.
Frequently Asked Questions
How often is Social Security withheld?
Every paycheck until you hit the $176,100 wage base in 2025. After that, no more SS withholding for the year — expect a larger paycheck in the second half of the year.
Does 401(k) reduce my taxable income?
Traditional 401(k) contributions reduce federal and most state taxable income dollar-for-dollar. A $500/month contribution at a 22% bracket saves ~$110/month in federal taxes.
What is the difference between gross and net pay?
Gross pay is total earnings before any deductions. Net pay (take-home pay) is what lands in your bank account after all taxes, insurance, and retirement contributions.
How do I increase my take-home pay?
Review your W-4 (claim all eligible allowances), maximize HSA contributions (triple tax advantage), and consider Roth 401(k) if you expect higher income later — no deduction now but tax-free withdrawals in retirement.