Understanding Your Paycheck: Federal Tax, FICA & Take-Home Pay
You're offered a $60,000 salary and your first paycheck lands noticeably smaller than $5,000 a month. The gap isn't a mistake — it's four or five specific deductions, each with its own rule. Once you can name them, your pay stub stops being a mystery.
The order things come out of your pay
Your gross pay gets reduced in a specific sequence, and the order matters because some deductions lower the income that later taxes are calculated on:
- Pre-tax deductions — traditional 401(k), HSA, and often health-insurance premiums. These come out first and reduce your taxable wages.
- FICA taxes — Social Security and Medicare, calculated on most of your pay.
- Federal income tax — withheld based on your W-4 and the tax brackets.
- State & local income tax — varies widely; some states have none.
- Post-tax deductions — Roth 401(k), disability insurance, etc.
What lands in your bank account after all of that is your net pay, or take-home pay.
FICA: the flat 7.65% almost everyone pays
FICA funds Social Security and Medicare, and for most workers it's the most predictable line on the stub because it's basically flat:
| Tax | Employee rate | Applies to |
|---|---|---|
| Social Security | 6.2% | Wages up to the annual wage base ($184,500 in 2026) |
| Medicare | 1.45% | All wages, no cap |
| Additional Medicare | +0.9% | Wages above $200,000 |
Add the first two and you get the famous 7.65%. Your employer quietly pays another 7.65% on your behalf — which is exactly why self-employed people owe both halves (15.3%) as "self-employment tax." FICA is calculated on your gross wages (before the income-tax standard deduction), though pre-tax 401(k) contributions do reduce the wages Social Security and Medicare see.
Federal income tax: marginal vs. effective
This is where most confusion lives. The US uses progressive marginal brackets: each slice of your income is taxed at its own rate, not your whole income at your top rate. Here are the 2026 brackets for a single filer (IRS Rev. Proc. 2025-32):
| Rate | 2026 taxable income (single) |
|---|---|
| 10% | $0 – $12,400 |
| 12% | $12,400 – $50,400 |
| 22% | $50,400 – $105,700 |
| 24% | $105,700 – $201,775 |
| 32% | $201,775 – $256,225 |
| 35% | $256,225 – $640,600 |
| 37% | $640,600 and up |
Two different rates describe your taxes:
- Your marginal rate is the bracket your last dollar falls in — it tells you what a raise or an extra 401(k) dollar is worth.
- Your effective rate is total tax ÷ total income — your real, blended tax burden, which is always lower than your marginal rate.
Worked example: $60,000 salary, single, 2026
Start with the standard deduction of $16,100, so taxable income is $60,000 − $16,100 = $43,900.
| Slice | Rate | Tax |
|---|---|---|
| First $12,400 | 10% | $1,240 |
| Next $31,500 (up to $43,900) | 12% | $3,780 |
| Federal income tax | $5,020 |
Now add FICA on the full $60,000: Social Security $3,720 + Medicare $870 = $4,590.
| Item | Amount |
|---|---|
| Gross salary | $60,000 |
| − Federal income tax | −$5,020 |
| − FICA (7.65%) | −$4,590 |
| Take-home (before state tax) | $50,390 / yr ≈ $4,199 / mo |
Marginal rate: 12%. Effective federal income-tax rate: 8.4%. Add FICA and the effective federal burden is about 16%. State income tax, where it applies, comes on top.
Run your own numbers
Figro's Paycheck Calculator does this full breakdown for any salary, state, filing status, and 401(k) rate — updated for 2026 brackets and FICA. It runs in your browser; nothing you enter is uploaded.
Open the Paycheck Calculator →Why pre-tax deductions are quietly powerful
A traditional 401(k) contribution comes out before federal (and usually state) income tax is calculated. So if your marginal rate is 22%, every $1,000 you contribute only costs you about $780 in take-home pay — the government effectively chips in the other $220 by not taxing it now. That's the single clearest reason to capture at least your full employer match: it's an immediate, guaranteed return that no investment can promise.
HSAs go one better: contributions are pre-tax, growth is tax-free, and qualified medical withdrawals are tax-free — the only triple-tax-advantaged account in the US code.
Your refund is not a bonus
A big April refund feels like a windfall, but it's just the government returning money it over-withheld from your own paychecks — an interest-free loan you gave the IRS all year. If you consistently get a large refund, your W-4 is withholding too much; adjusting it puts that money in each paycheck instead. The goal isn't a big refund; it's owing (or getting back) close to zero.
A quick reading of your pay stub
- Gross pay — your salary for the period, before anything comes out.
- OASDI / Fed OASDI EE — that's Social Security (6.2%).
- Fed MED / EE — Medicare (1.45%).
- FIT / Fed W/H — federal income tax withholding, driven by your W-4.
- Net pay — what actually hits your account.
Once the acronyms have names, you can sanity-check any stub in about a minute — and spot the rare payroll error before it costs you.
Figro's guides are for general education and estimation, not personalized tax advice. Figures reflect 2026 US federal rules; confirm your specifics with a qualified professional.