The order payroll applies deductions in
Gross pay is reduced in a specific sequence, and the sequence decides how much tax you pay. Payroll takes Section 125 cafeteria-plan deductions first — health, dental and vision premiums, HSA and FSA contributions. These come out before every tax, including Social Security and Medicare, which is what makes them the most valuable dollar in the whole paycheck.
Next comes the traditional 401(k) or 403(b) deferral. This escapes federal and state income tax but not FICA: you pay 7.65% on money you never see. That asymmetry is deliberate, because Social Security benefits are calculated from FICA wages, so deferring pay does not reduce the earnings record your future benefit is based on.
What is left is your FICA wage base and, after the standard deduction, your taxable income. Federal tax is charged on the second of those through the bracket table, state tax usually on something close to the first, and only then do post-tax items such as Roth contributions and union dues come out. Getting this order wrong is the single most common error in a hand-built paycheck estimate — it is what makes people believe a 401(k) contribution saves them their full marginal rate plus 7.65%.
Marginal brackets, and why your average rate is lower
Federal income tax is charged in slices. On the 2025 single table, the first $11,925 of taxable income is taxed at 10%, the amount from there to $48,475 at 12%, the next slice to $103,350 at 22%, and so on to 37%. Being "in the 22% bracket" means only the top slice is taxed at 22%; every dollar below the threshold is still taxed at the lower rates. That is why a raise never costs you money, and why your average rate is always below your marginal rate.
On the worked example below, taxable income is $56,450 and the marginal rate is 22%, but the federal tax works out at $7,333, which is 13.0% of taxable income and 9.2% of gross pay. Add FICA and a 5% state tax and the total is 21.0% of gross — well under the 22% headline. Both numbers are useful: the marginal rate tells you what an extra dollar of income or deduction is worth, and the average rate tells you what your life costs in tax.
The thresholds and the standard deduction are adjusted every year for inflation, and this calculator uses the 2025 figures: a $15,750 standard deduction for a single filer and $31,500 for a joint filer. Check the current year's numbers against IRS Publication 17 or the annual revenue procedure and use the override field if they have moved. Head of household filers have wider low brackets than the single table, so entering the head of household standard deduction in the override gets you closer, but the result will still be slightly high.
Worked example: $80,000 single, paid biweekly
You earn $80,000, defer 6% to a traditional 401(k), pay $3,000 a year in health premiums through a cafeteria plan, live in a state charging 5%, and are paid every two weeks.
- Pre-tax deductions. 401(k): 80,000 × 0.06 = $4,800. Section 125: $3,000. Total $7,800.
- FICA wages. 80,000 − 3,000 = $77,000. The 401(k) does not reduce this.
- Social Security. 77,000 × 0.062 = $4,774.00, well below the $176,100 wage base.
- Medicare. 77,000 × 0.0145 = $1,116.50. FICA in total is $5,890.50.
- Taxable income. 80,000 − 4,800 − 3,000 − 15,750 = $56,450.
- Federal tax, slice by slice. 11,925 × 10% = $1,192.50. (48,475 − 11,925) = 36,550 × 12% = $4,386.00. (56,450 − 48,475) = 7,975 × 22% = $1,754.50. Total $7,333.00.
- State tax. (80,000 − 7,800) × 5% = 72,200 × 0.05 = $3,610.00.
- Net pay. 80,000 − 7,800 − 7,333.00 − 5,890.50 − 3,610.00 = $55,366.50 a year, or 55,366.50 ÷ 26 = $2,129.48 a paycheck.
Total tax is 7,333.00 + 5,890.50 + 3,610.00 = $16,833.50, which is 21.04% of gross. The 401(k) money is yours, not tax, so the amount that actually left your control is the $16,833.50, not the $24,633.50 gap between gross and net.
What the result tells you to do next
Read the per-paycheck figure as a planning number and the effective rate as a diagnostic. If the effective rate looks high, the lever is almost always pre-tax deductions rather than the brackets: at a 22% federal marginal rate plus 5% state, every extra dollar into a traditional 401(k) costs you 73 cents of take-home pay, and every dollar into an HSA costs about 65 cents once FICA is included.
Compare the result against your actual paystub, and expect small differences. Your employer withholds using the tables in IRS Publication 15-T driven by your Form W-4, which handles multiple jobs, dependents and other income through the steps on that form. Withholding is a forecast of your tax, not the tax itself; the return reconciles them. A large refund means you lent the government money interest-free all year, and the fix is a W-4 adjustment rather than a change in what you owe.
Once you have the net figure, use it for budgeting rather than the gross. Housing affordability rules and lender ratios run on gross — check them with the debt-to-income ratio calculator — but your actual spending capacity is the net number, which is what the 50/30/20 budget calculator works from. If you are comparing an offer in another state, run both through this calculator with the right state rate before comparing them with the cost of living comparison calculator, since income tax appears in no price index.
2025 federal income tax brackets
| Rate | Single, taxable income | Married filing jointly |
|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 |
| 37% | Above $626,350 | Above $751,600 |
Standard deduction for 2025: $15,750 single and $31,500 married filing jointly. Social Security is 6.2% on the first $176,100 of wages, Medicare 1.45% on all wages, plus 0.9% on wages above $200,000.
Why your real paycheck will differ from this estimate
- Withholding is not tax. Employers use the Publication 15-T percentage-method tables and your W-4, which can withhold more or less than your actual liability. The difference shows up as a refund or a balance due.
- State tax is not a flat rate. Most states have brackets, their own standard deduction, and their own treatment of retirement contributions. The flat rate here is an approximation; use your prior year's state tax divided by wages for a better one.
- Credits are not included. The Child Tax Credit, education credits and the Earned Income Tax Credit all reduce tax after the brackets are applied, and can reduce it below zero for lower incomes.
- The Social Security cap changes your paychecks mid-year. Once wages pass the wage base, the 6.2% stops and later paychecks grow. This calculator spreads the annual total evenly instead.
- Bonuses are withheld differently. Supplemental wages are commonly withheld at a flat federal rate, which is why a bonus often looks over-taxed. The annual reconciliation fixes it.
- Only two filing statuses are modelled. Head of household and married filing separately have their own brackets; use the deduction override to get closer, and treat the result as indicative.
Getting the withholding itself right
If this estimate and your paystub disagree by a large margin, the W-4 is usually the reason. The form redesigned in 2020 no longer uses allowances: it asks about multiple jobs, dependents, other income and extra deductions directly. Two-earner households under-withhold most often, because each employer withholds as if its salary were the household's only income, and the household lands in a higher bracket than either job implies. The multiple jobs worksheet and the IRS Tax Withholding Estimator both exist to fix exactly that.
The other common mismatch is a mid-year change — a raise, a bonus, a new deduction — which payroll annualises from the point it happens. That is why a raise in July can look like it moved you into a much higher bracket for the rest of the year. Neither the bracket nor your annual tax has changed; only the projection payroll is withholding against has. Rerun this calculator with the new full-year salary to see the figure the year will settle at, and compare offers on the annual net rather than the first paycheck after a change.