Your salary is gross pay, not the amount that lands in your bank account. For each pay period, payroll subtracts tax withholding, benefit contributions and any other deductions from your gross wages to arrive at net pay, or take-home pay. This U.S.-focused guide explains the main parts of that calculation and what to check when a paycheck is lower than expected.
How a paycheck turns salary into take-home pay
A useful model is:
Gross wages for the pay period − tax withholding − employee benefit contributions − other deductions = net pay.
Annual salary is a yearly gross-compensation figure. Payroll converts it into wages for each pay period, so pay frequency and the wages or hours in that period matter. A budgeting worksheet from the U.S. Department of Labor groups taxes, retirement contributions, health, dental and vision coverage, other insurance, and other deductions before net take-home pay: DOL Savings Fitness.
There is no reliable universal percentage to subtract from salary to predict your deposit. A useful estimate needs your work location, pay frequency, gross wages for the period, Form W-4 information, benefit elections and other deductions.
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Which taxes come out of a paycheck?
Federal income-tax withholding
Federal income-tax withholding is money paid toward your eventual federal income-tax bill; it is not the bill itself. The amount withheld from regular wages depends on what you earn, your pay period and the information on your Form W-4, according to IRS Publication 505 (2026). The form can account for filing status, multiple jobs, credits, other income, deductions and any extra amount you ask your employer to withhold.
Changing your W-4 can change the amount withheld from each check without changing your gross salary. The IRS calls federal income tax a “pay-as-you-go tax”: if too little is withheld, you may owe at filing time and could face a penalty; if too much is withheld, you generally wait for a refund rather than having that money available during the year. See the IRS explanation of tax withholding.
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Social Security and Medicare (FICA)
Social Security and Medicare withholding are payroll taxes separate from federal income-tax withholding. Form W-4 does not set them. For tax year 2026, the IRS lists these employee-side rates and thresholds on its Social Security and Medicare Taxes page:
| Tax | Employee withholding for 2026 | How the threshold works |
|---|---|---|
| Social Security | 6.2% | Applies up to the 2026 wage base of $184,500 in covered wages; withholding stops on covered wages above that annual limit. |
| Medicare | 1.45% | No wage base limit; withholding continues as wages rise. |
| Additional Medicare Tax | 0.9% | An employer begins withholding after it pays an employee more than $200,000 in wages in a calendar year. The employer applies this threshold without regard to filing status; final liability may depend on the employee’s filing circumstances. |
These are 2026 figures and can change in later tax years; check the IRS page for current thresholds.
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State, local and other deductions
Depending on where you work or live, state and local income-tax withholding may also reduce your check. An IRS federal withholding estimate is not a full net-pay calculation: the IRS estimator FAQ instructs users not to include state or local taxes, Social Security or Medicare when entering federal withholding information.
Other paycheck deductions may include court-ordered payments or items you authorized, depending on your situation, employer, plan and applicable law. Check the pay statement and ask payroll about an unfamiliar line; rules can differ by jurisdiction.
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How benefit choices affect the deposit
Health-plan premiums
Employees commonly pay part of the cost of employer-sponsored health coverage through payroll. The employee share depends on the employer’s plan and the coverage tier selected. The U.S. Department of Labor advises workers to find out both the employer contribution and their own cost for chosen coverage in its health-plan guidance.
A premium deduction reduces cash pay, but its tax treatment depends on the plan arrangement and applicable rules. Do not assume every insurance deduction is treated the same way; check the plan materials or ask the benefits office how a specific election is handled.
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Traditional pretax 401(k) salary deferrals reduce the cash wages paid to you and generally defer federal income tax on the contribution. Designated Roth 401(k) contributions are made after tax. The Department of Labor describes the distinction in its 401(k) plan guidance for small businesses.
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The DOL’s Savings Fitness guide gives a simplified illustration: a $100 monthly retirement contribution reduces take-home pay by $85 when the assumed income-tax rate is 15%. That is an example under those assumptions, not a general rule for every employee; actual effects depend on tax rates, payroll treatment and other circumstances.
An employer match can add value to retirement savings, but it is not an employee cash deduction from that paycheck. Review the plan’s match formula, eligibility and vesting separately from the amount deposited into your account.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to read a paycheck or estimate net pay
- Start with the correct gross wages. Use the wages for the actual pay period, rather than dividing annual salary blindly if hours, commissions, unpaid leave or other earnings vary.
- Check federal income-tax withholding. Compare the pay-statement line with your W-4 choices, including any multiple-job adjustment, credits, other income, deductions or extra withholding.
- Keep FICA separate. Identify Social Security and Medicare lines independently of federal income-tax withholding; their rules and thresholds differ.
- Add applicable state and local taxes. A federal withholding estimate alone will not capture these amounts.
- Review benefits by election. List health coverage, retirement contributions and other benefits, and confirm whether each is pretax or after-tax under your plan.
- Account for other deductions and compare with the deposit. If the figures do not reconcile, ask payroll to explain the pay-statement line or correction.
- Use the right tool for the question. For federal withholding, use the IRS Tax Withholding Estimator and follow its directions. For employer-specific deductions, consult current plan documents or your payroll or benefits office.
It can be useful to review withholding after a major change in income or personal circumstances. An estimator addresses federal withholding; it does not replace a full calculation of state and local taxes, benefit costs and other payroll deductions.
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How to compare take-home pay between jobs or benefit options
Compare offers over the same pay period and distinguish gross compensation from spendable cash. A larger salary does not guarantee a proportionally larger deposit when pay frequency, tax settings, coverage costs or retirement elections differ.
- Gross compensation and pay frequency
- Federal withholding assumptions, including W-4 entries
- Applicable state and local taxes
- Employee health-plan premium and coverage tier
- Traditional pretax versus designated Roth retirement contributions
- Employer match, eligibility and vesting
- Other paycheck deductions
For a fair comparison, keep assumptions consistent where possible, then account for each employer’s actual benefit costs and plan terms. The deposit is one part of compensation, not a substitute for comparing coverage and retirement benefits.
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