US Paycheck Deductions Explained: Where Your Money Actually Goes
Federal tax, FICA, state tax, 401(k)... your gross pay gets whittled down fast. Here's a plain-English breakdown of every line on a US paycheck — and how to estimate your net pay before payday.
Your offer letter says $60,000 a year. Your first paycheck says something noticeably smaller. That gap is made up of several separate deductions — some federal, some state, some optional. This guide explains each one so you can read your pay stub with confidence and estimate your net (take-home) pay in advance.
Prefer to skip to the number? Our US Paycheck Calculator estimates your take-home pay in seconds.
Gross pay vs. net pay
Gross pay is your salary before anything is taken out. Net pay is what actually hits your bank account. Everything in between falls into two buckets: taxes (mandatory) and withholdings (some mandatory, some you choose).
1. Federal income tax
The US uses progressive tax brackets: different slices of your income are taxed at different rates, from 10% up to 37%. Your employer withholds an estimate each pay period based on the Form W-4 you filled out. Key point — a higher bracket only applies to the portion of income inside that bracket, not your whole salary.
The standard deduction reduces the income you're actually taxed on. For a single filer it's over $14,000, meaning the first chunk of your earnings is effectively tax-free at the federal level.
2. FICA: Social Security and Medicare
FICA is a flat payroll tax split into two parts, and it comes out of almost every paycheck:
| Tax | Employee rate | Notes |
|---|---|---|
| Social Security | 6.2% | Up to an annual wage cap |
| Medicare | 1.45% | No cap; extra 0.9% on high earners |
Together that's 7.65% of your pay for most workers. Your employer quietly matches it — you just don't see their half on your stub.
3. State (and sometimes local) income tax
This is where location matters enormously. A handful of states — including Texas, Florida, Washington and Nevada — have no state income tax at all. Others, like California and New York, have progressive state brackets on top of federal tax, and some cities add a local tax as well. Two people earning the same salary can take home very different amounts depending purely on their zip code.
4. Pre-tax withholdings (the good kind)
- 401(k) contributions — money you move into retirement savings, often before tax, which lowers your taxable income today.
- Health insurance premiums — frequently deducted pre-tax.
- HSA / FSA contributions — pre-tax dollars set aside for medical costs.
These reduce your paycheck now, but they either build wealth or pay for things you'd buy anyway — with a tax break attached.
A worked example
Here's the rough shape of a $60,000 salary for a single filer in a no-income-tax state, contributing 5% to a 401(k):
| Item | Approx. annual amount |
|---|---|
| Gross salary | $60,000 |
| 401(k) 5% (pre-tax) | − $3,000 |
| Federal income tax | − $4,900 |
| FICA (7.65%) | − $4,590 |
| Estimated net pay | ≈ $47,510 / year |
That's roughly $3,959 a month. Add a state income tax and the monthly figure drops further. These numbers are illustrative — your filing status, state and benefits all shift the result.
Estimate your own paycheck
The fastest way to see your real number is to run it through our US Paycheck Calculator, which factors in federal tax, FICA and your pre-tax contributions.
Planning a big purchase? Pair it with our US Mortgage Calculator to see what your take-home pay can comfortably support, or grow your savings with the Compound Interest Calculator.