Your employer uses a specific formula - set by the IRS - to calculate how much of each paycheck you actually keep. This guide walks through every step of that formula using real 2026 tax rates, with three worked examples at $60,000, $85,000, and $120,000 annual gross. If you'd rather skip the math, use our free paycheck calculator to get your number in seconds.
The take-home pay formula
Take-home pay - also called net pay - is what's left after your employer subtracts all required taxes and any voluntary deductions from your gross paycheck. The order of operations matters because some deductions reduce your taxable income and some don't.
- Pre-tax deductions (401k, HSA, health insurance)
= Federal Taxable Income
- FICA taxes (Social Security 6.2% + Medicare 1.45%)
- Federal income tax (based on 2026 brackets)
- State income tax (0% to 13.3% depending on state)
- Post-tax deductions (Roth 401k, garnishments)
= Your take-home pay (net pay)
Step 1 - Start with your gross pay per period
Gross pay is your earnings before any deductions. If you're salaried, divide your annual salary by the number of pay periods per year:
| Pay frequency | Pay periods/year | Formula |
|---|---|---|
| Weekly | 52 | Annual / 52 |
| Biweekly (most common) | 26 | Annual / 26 |
| Semi-monthly | 24 | Annual / 24 |
| Monthly | 12 | Annual / 12 |
For hourly workers: hourly rate x hours worked per period = gross pay.
Step 2 - Subtract pre-tax deductions
Pre-tax deductions are taken before federal income tax is calculated, reducing your taxable income. Common pre-tax deductions include:
- Traditional 401(k) contributions - up to $23,500 for 2026 ($31,000 if age 50+)
- Health Savings Account (HSA) - up to $4,300 single / $8,550 family in 2026
- Employer-sponsored health insurance premiums (your share)
- Flexible Spending Account (FSA) - up to $3,300 in 2026
- Dependent care FSA - up to $5,000
Step 3 - Calculate FICA taxes (Social Security + Medicare)
FICA stands for Federal Insurance Contributions Act. It funds Social Security and Medicare. Unlike income tax, FICA uses flat rates with specific caps:
| Tax | Your rate | 2026 wage cap | Notes |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | $184,500 | Stops once you hit the cap |
| Medicare (HI) | 1.45% | No cap | Applies to all wages |
| Additional Medicare | 0.9% | - | Only on wages above $200k (single) / $250k (MFJ) |
| Total (most earners) | 7.65% | - | On the first $184,500 |
Step 4 - Calculate federal income tax using 2026 brackets
Federal income tax uses a progressive bracket system. Here are the 2026 brackets for the two most common filing statuses, using the standard deduction:
2026 federal income tax brackets - single filers
Standard deduction: $15,000 (subtracted from gross before applying brackets)
| Taxable income | Rate | Tax on this bracket |
|---|---|---|
| $0 - $11,925 | 10% | Up to $1,192 |
| $11,926 - $48,475 | 12% | Up to $4,386 |
| $48,476 - $103,350 | 22% | Up to $12,074 |
| $103,351 - $197,300 | 24% | Up to $22,548 |
| $197,301 - $250,525 | 32% | Up to $17,031 |
| $250,526 - $626,350 | 35% | Up to $131,508 |
| Over $626,350 | 37% | On every dollar above |
2026 federal income tax brackets - married filing jointly
Standard deduction: $30,000
| Taxable income | Rate |
|---|---|
| $0 - $23,850 | 10% |
| $23,851 - $96,950 | 12% |
| $96,951 - $206,700 | 22% |
| $206,701 - $394,600 | 24% |
| $394,601 - $501,050 | 32% |
| $501,051 - $751,600 | 35% |
| Over $751,600 | 37% |
Step 5 - Subtract state income tax
State income tax varies enormously - from 0% to 13.3%. Here's a quick reference for the 10 most populous states:
| State | Income tax | On $85k gross, approx annual state tax |
|---|---|---|
| California | 1% - 13.3% (progressive) | ~$5,400 |
| New York | 4% - 10.9% (progressive) | ~$4,600 |
| Oregon | 4.75% - 9.9% | ~$4,800 |
| Illinois | 4.95% (flat) | ~$4,200 |
| Michigan | 4.25% (flat) | ~$3,600 |
| Georgia | 5.49% (flat) | ~$4,600 |
| North Carolina | 4.5% (flat) | ~$3,825 |
| Florida | 0% - no state income tax | $0 |
| Texas | 0% - no state income tax | $0 |
| Washington | 0% income tax* | $0 (see note) |
*Washington has no income tax but enacted a 7% capital gains tax on gains over $250,000 starting 2023. Affects high earners with investment income only. Washington paycheck calculator.
Use our California paycheck calculator, Texas paycheck calculator, or any of the 50 state calculators to get exact state withholding for your specific salary and filing status.
Step 6 - Subtract post-tax deductions
Post-tax deductions come out after income tax has been calculated. They do not reduce your taxable income:
- Roth 401(k) or Roth IRA contributions - you pay tax now, withdrawals are tax-free in retirement
- After-tax 401(k) contributions (above the pre-tax limit)
- Wage garnishments - court-ordered deductions (child support, student loans in default)
- Union dues
- Voluntary life or disability insurance (some plans)
Worked examples: $60k, $85k, and $120k
All three examples assume: single filer, biweekly pay (26 checks/year), standard deduction, no pre-tax deductions, no other income. State examples are shown separately below each federal calculation.
Gross per paycheck: $60,000 / 26 = $2,307.69
| Deduction | Annual | Per paycheck |
|---|---|---|
| Gross income | $60,000 | $2,307.69 |
| Standard deduction | -$15,000 | - |
| Federal taxable income (italic) | $45,000 | - |
| Federal income tax | -$4,819 | -$185.35 |
| Social Security (6.2%) | -$3,720 | -$143.08 |
| Medicare (1.45%) | -$870 | -$33.46 |
| Federal take-home (no state tax) | $50,591 | $1,945.81 |
Effective federal rate: 14.7% | Top marginal bracket: 12%
| State scenario | Annual state tax | Annual take-home | Biweekly take-home |
|---|---|---|---|
| Texas / Florida (no state tax) | $0 | $50,591 | $1,946 |
| Illinois (4.95% flat) | -$2,970 | $47,621 | $1,832 |
| California (progressive) | -$2,050 | $48,541 | $1,867 |
| New York | -$2,400 | $48,191 | $1,854 |
Gross per paycheck: $85,000 / 26 = $3,269.23
| Deduction | Annual | Per paycheck |
|---|---|---|
| Gross income | $85,000 | $3,269.23 |
| Standard deduction | -$15,000 | - |
| Federal taxable income | $70,000 | - |
| Federal income tax | -$10,295 | -$396.00 |
| Social Security (6.2%) | -$5,270 | -$202.69 |
| Medicare (1.45%) | -$1,232 | -$47.40 |
| Federal take-home (no state tax) | $68,203 | $2,623.14 |
Effective federal rate: 19.8% | Top marginal bracket: 22%
| State scenario | Annual state tax | Annual take-home | Biweekly take-home |
|---|---|---|---|
| Texas / Florida (no state tax) | $0 | $68,203 | $2,623 |
| Illinois (4.95% flat) | -$4,208 | $63,995 | $2,461 |
| California (progressive) | -$5,400 | $62,803 | $2,415 |
| New York + NYC local | -$8,200 | $60,003 | $2,308 |
The $85k California vs Texas gap: ~$5,400/year - or roughly $208 less per biweekly paycheck.
Gross per paycheck: $120,000 / 26 = $4,615.38
| Deduction | Annual | Per paycheck |
|---|---|---|
| Gross income | $120,000 | $4,615.38 |
| Standard deduction | -$15,000 | - |
| Federal taxable income | $105,000 | - |
| Federal income tax | -$19,668 | -$756.46 |
| Social Security (6.2%) | -$7,440 | -$286.15 |
| Medicare (1.45%) | -$1,740 | -$66.92 |
| Federal take-home (no state tax) | $91,152 | $3,506.23 |
Effective federal rate: 23.5% | Top marginal bracket: 24%
| State scenario | Annual state tax | Annual take-home | Biweekly take-home |
|---|---|---|---|
| Texas / Florida (no state tax) | $0 | $91,152 | $3,506 |
| Illinois (4.95% flat) | -$5,940 | $85,212 | $3,277 |
| California (progressive) | -$9,800 | $81,352 | $3,129 |
| New York + NYC local | -$12,400 | $78,752 | $3,029 |
At $120k, the California-Texas gap widens to ~$9,800/year.
How your state changes everything
State income tax is the single biggest variable in your take-home pay after federal taxes. The 9 states with no income tax give every resident a permanent annual raise compared to high-tax states - but there are trade-offs worth understanding.
The 9 no-income-tax states
Alaska, Florida, Nevada, New Hampshire (wages only), South Dakota, Tennessee (dividends only), Texas, Washington, and Wyoming collect no state income tax on wages. That said, Texas and New Hampshire have among the highest property taxes in the nation, and Washington's sales tax (6.5% base) is above average. The "no income tax" headline doesn't mean zero total state-and-local tax burden.
The highest-tax states (for an $85k earner)
California (13.3% top rate), Hawaii (11%), New Jersey (10.75%), Oregon (9.9%), Minnesota (9.85%), and New York City (combined state + city can reach ~15%) hit high-earners hardest. If you're considering a job offer in multiple states, our state-by-state paycheck calculator will show you the exact take-home difference.
5 ways to legally increase your take-home pay
Maximize pre-tax deductions
Update your W-4 after life changes
Use an HSA if you're on a high-deductible health plan
Switch to a no-income-tax state (if you can work remotely)
Elect commuter benefits if your employer offers them
Frequently asked questions
What percentage of my paycheck goes to taxes in 2026?
What is the 2026 Social Security wage base?
What is the 2026 standard deduction?
Does my 401(k) contribution reduce my take-home pay dollar for dollar?
Why did my paycheck go down this month even though my salary didn't change?
How is take-home pay different from gross pay?
Sources & methodology
All tax figures in this article are sourced directly from IRS publications and the Social Security Administration. This article is for informational and estimation purposes only and does not constitute tax or financial advice. For your specific tax situation, consult a CPA or enrolled agent.
- IRS Revenue Procedure 2025-28 - 2026 inflation-adjusted tax parameters. irs.gov/pub/irs-drop/rp-25-28.pdf
- IRS Publication 15-T (2026) - Federal Income Tax Withholding Methods. irs.gov/pub/irs-pdf/p15t.pdf
- Social Security Administration - 2026 Contribution and Benefit Base. ssa.gov/oact/cola/cbb.html
- IRS Publication 505 - Tax Withholding and Estimated Tax. irs.gov/pub/irs-pdf/p505.pdf
- IRS Instructions for Form W-4 (2026). irs.gov/forms-pubs/about-form-w-4