How Your Paycheck Is Calculated: Take-Home Pay Explained

Your salary is a headline number. What actually lands in your account is that number minus a stack of deductions, and the gap is bigger than most people expect — often 20-30% for a middle income. Understanding each piece is the difference between budgeting from a number that's real and one that isn't.

Deductions fall into two groups: taxes you owe the government, and money you choose to divert before it's taxed (like a 401(k) or health premiums). Both shrink your paycheck, but only one is money you keep.

Federal income tax is charged on a marginal-bracket system: only the dollars inside each bracket are taxed at that bracket's rate, after subtracting the standard deduction. So being 'in the 22% bracket' does not mean 22% of your whole income disappears.

FICA is two flat taxes: Social Security at 6.2% (only up to an annual wage base — $184,500 in 2026) and Medicare at 1.45% on all wages, plus an extra 0.9% on very high earnings. State income tax varies wildly: nine states charge none on wages, some use a single flat rate, and others use their own brackets. Finally, pre-tax deductions — traditional 401(k), HSA, health premiums — come out before income tax is calculated, which is what makes them tax-advantaged.

You can approximate your net pay by hand, or let a calculator apply the current brackets for you.

Even a perfect liability estimate differs from your actual paycheck, because your employer withholds based on your W-4 using IRS tables — not your true year-end liability. That intentional gap is what your refund or April payment settles.

Other real-world differences include local city or county income taxes, state disability and paid-leave insurance, and whether your retirement contributions are traditional or Roth. A calculator gives you the shape of your pay; your pay stub gives you the exact numbers for your situation.