The 7-Tax Stack: Everything That Comes Out of Your Paycheck
Last updated · Paycheck Mechanics
The number on your offer letter and the number that lands in your bank account are not the same — and the gap is bigger than most workers realize. A typical paycheck has between 4 and 7 separate tax deductions, each with its own rate, wage base, and rules. This guide breaks down all 7 deductions you might see on a US paycheck, with current 2026 rates and the wage bases that determine when each tax stops or starts. By the end you should be able to read any pay stub and verify every number on it.
Tax 1: Federal income tax (the biggest variable)
Federal income tax is progressive: the more you earn, the higher the marginal rate on each additional dollar. The 2026 brackets for single filers (rounded):
- 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%: above $626,350
These are marginal rates — only the dollars within each bracket are taxed at that rate. A single filer earning $100,000 does NOT pay 22 percent on the entire $100,000. They pay 10 percent on the first $11,925, 12 percent on the next portion, and 22 percent only on income above $48,475. The effective rate (total federal tax ÷ total income) is much lower than the marginal rate — typically 14–18 percent for someone in the 22 percent bracket.
Withholding is calculated using IRS Publication 15-T tables and your W-4. If you have one job and a standard W-4, withholding is usually within 2 percent of your actual liability. If you have multiple jobs, dependents, or itemized deductions, the gap can grow and you may need to adjust your W-4.
Tax 2: Social Security (capped at the wage base)
Social Security tax is 6.2 percent of your wages, but only up to the annual wage base. The 2026 wage base is $176,100. Once your year-to-date wages exceed this number, Social Security tax stops for the rest of the calendar year.
This creates the "December bump" for high earners. Someone earning $250,000 hits the wage base in early September. From September through December, their take-home pay jumps by about $1,089 per month (6.2 percent of monthly gross). The extra cash is real but temporary — it resets January 1.
The wage base typically rises 3–5 percent per year, indexed to average national wage growth. It rose from $168,600 in 2025 to $176,100 in 2026 — a $7,500 increase. Plan around it if you're a high earner: large bonuses paid in December are partially Social Security free if you've already hit the base.
Tax 3: Medicare (no cap, plus a high-earner surcharge)
Medicare tax is 1.45 percent of all wages, with no wage base limit. Unlike Social Security, you pay Medicare on every dollar earned.
For high earners, there's an additional 0.9 percent Medicare surcharge on wages above:
- $200,000 (single filers)
- $250,000 (married filing jointly)
- $125,000 (married filing separately)
This brings the total Medicare rate for high earners to 2.35 percent. The surcharge is only paid by the employee, not matched by the employer like the regular 1.45 percent. It is also calculated per-employer at withholding time, so dual-income couples may underpay during the year and owe at tax time.
Tax 4: State income tax (zero to 13.3%)
State income tax varies more dramatically than any other paycheck deduction. The major patterns:
- Nine no-tax states: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. Wage earners pay 0% state income tax.
- Flat tax states: Pennsylvania (3.07%), Indiana (3.05%), Michigan (4.25%), Illinois (4.95%), Massachusetts (5%), Colorado (4.4%), Utah (4.55%), Kentucky (4%), North Carolina (4.5%), Arizona (2.5%). Same rate on every dollar.
- Progressive states: the rest, with rates from 1% to 13.3%. California has the highest top marginal rate (13.3% on income above $1M), followed by Hawaii (11%), New Jersey (10.75%), Oregon (9.9%), and New York (10.9%).
Use our US state pages for current state-specific take-home calculations.
Tax 5: Local income tax (only some cities)
Most US cities do not impose local income tax. The major exceptions:
- New York City: 3.078% to 3.876% progressive on top of NY state tax
- Yonkers, NY: 16.75% of NY state tax (effectively about 1.6%)
- Philadelphia, PA: 3.79% on residents, 3.44% on non-residents who work in the city
- Cleveland, Cincinnati, Columbus, OH: 2.5%
- Pittsburgh, PA: 3% (1% city + 2% Wage Tax)
- Maryland counties: 2.25% to 3.2% county income tax
- Detroit, MI: 2.4% residents, 1.2% non-residents
If your offer letter mentions one of these cities, factor in an additional 1–4 percent on top of state tax when calculating take-home.
Tax 6: State disability and family leave (a few states)
Five states deduct mandatory disability or family leave from paychecks:
- California SDI: 1.1% of all wages (no cap as of 2024). Funds State Disability Insurance and Paid Family Leave.
- New Jersey: ~0.06% TDI + 0.09% FLI on wages up to $165,400 (2025 base)
- New York: ~0.5% Family Leave (cap ~$87/year)
- Washington: ~0.74% Paid Family and Medical Leave
- Massachusetts: ~0.46% Paid Family and Medical Leave
- Oregon, Colorado, Connecticut, Delaware: similar programs ranging from 0.4% to 0.9%
California's removal of the SDI wage base (effective 2024) means high earners now pay full 1.1% on every dollar — a meaningful increase for $200K+ earners. A $300,000 California employee pays $3,300/year in SDI alone.
Tax 7: Pre-tax deductions (not technically taxes, but reduce paycheck)
Pre-tax deductions reduce your taxable income before federal and state tax are calculated:
- 401(k) traditional: 2026 limit $23,500 ($31,000 if 50+)
- HSA (with HDHP): $4,300 self / $8,550 family (2026)
- FSA medical: $3,300 (2026)
- Commuter benefits: $325/month (2026)
- Health, dental, vision premiums: typically pre-tax under Section 125 cafeteria plan
These are not taxes but they appear on your pay stub between gross and net. They reduce your tax owed by your marginal rate. A $100K California earner contributing $23,500 to 401(k) saves about $7,900 in combined federal + state tax — meaning the actual reduction in take-home is only $15,600, not the full $23,500.
Reading your pay stub: a checklist
Every US pay stub should show, at minimum:
- Gross pay (before any deductions)
- Pre-tax deductions (401k, HSA, health premium)
- Federal income tax withheld
- Social Security tax (6.2%)
- Medicare tax (1.45% + 0.9% over thresholds)
- State income tax withheld (or zero if no-tax state)
- Local income tax (if applicable)
- State disability/leave (if applicable)
- Post-tax deductions (Roth 401k, garnishments)
- Net pay (what hits your bank account)
If your pay stub does not break down these line items, ask your employer or HR to provide a detailed pay statement. Federal law requires employers to provide pay records, though the format varies by state.
Frequently Asked Questions
What deductions come out of my paycheck?+
Federal income tax, Social Security (6.2% up to $176,100), Medicare (1.45% on all wages plus 0.9% over $200K), state income tax (0–13.3%), local income tax in some cities, state disability/family leave in some states, and pre-tax contributions like 401(k) and HSA.
How much does Social Security take from my paycheck?+
6.2 percent of wages up to the annual wage base ($176,100 in 2026). Above the wage base, no more Social Security tax for the rest of the year. High earners see a "December bump" in take-home pay when they hit the cap.
Why is my paycheck higher in December?+
If you earn above the Social Security wage base ($176,100 in 2026), you stop paying the 6.2% Social Security tax once your year-to-date wages exceed it. For high earners, this can mean an extra $1,089/month in take-home from the month you cross the wage base until December 31.
Do all states take income tax?+
No. Nine states have no broad-based income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Workers in these states pay only federal income tax + FICA (Social Security and Medicare).
What is the additional Medicare tax?+
A 0.9% surcharge on wages above $200,000 (single) or $250,000 (married filing jointly). It is only paid by the employee, not matched by the employer. Combined with the regular 1.45% Medicare rate, high earners pay 2.35% Medicare on wages above the threshold.
Do 401(k) contributions reduce my paycheck or my tax?+
Both. Pre-tax 401(k) contributions reduce your taxable income, which reduces both federal and state income tax. The actual reduction in take-home pay is the contribution minus the tax savings. At a 30% combined marginal rate, every $1,000 contributed reduces take-home by only $700.
Why does California take 1.1% extra from my paycheck?+
California State Disability Insurance (SDI), which funds the state's disability and Paid Family Leave programs. As of 2024, California removed the SDI wage base, so high earners now pay 1.1% on every dollar of wages with no cap.