Paycheck FAQ

Your paycheck is reduced by federal income tax, Social Security and Medicare taxes (FICA, totaling 7.65%), state and possibly local income tax, and any pre-tax deductions like 401(k), health insurance, HSA, and FSA. Combined, these typically reduce a salary by 25, 35% before you see it.

FICA combines Social Security tax (6.2%) and Medicare tax (1.45%), totaling 7.65% of your wages. Your employer pays a matching amount. Social Security is capped at $184,500 (2026) but Medicare has no cap. Wages over $200,000 also incur an additional 0.9% Medicare tax.

Where this comes from: SSA, 2026 COLA fact sheet (wage base set under 42 U.S.C. §430), checked 2026-08-01 · Social Security Act §230 (42 U.S.C. §430); incorporated by IRC §3121(a)(1) for wages and IRC §1402(b) for self-employment income; set by statute, not adjusted annually · IRC §3101(b)(2) (wages); IRC §1401(b)(2) (self-employment income).

Gross pay is what you earn before any deductions. Net pay is what you take home after taxes and all deductions. Net pay is usually 65, 75% of gross for most employees. Gross is what's used for mortgages, rentals, and tax bracket calculations; net is what you can actually spend.

Pre-tax deductions are taken from your paycheck before federal income tax is calculated. The most common: traditional 401(k), health insurance premiums, HSA contributions, FSA contributions, and dependent care FSA. They reduce your taxable income and save you tax money.

Weekly = paid every week (52 paychecks/year). Biweekly = paid every 2 weeks (26 paychecks/year). Semimonthly = paid twice per month, usually on fixed dates like the 15th and 30th (24 paychecks/year). Same annual salary, different per-check amounts. Biweekly has two 'extra paycheck' months per year that semimonthly doesn't.

Your employer uses information from your W-4 (filing status, dependents, multiple jobs, extra withholding) along with IRS withholding tables based on your taxable wages for each pay period. The goal is to approximate your annual tax liability.

Bonuses are typically withheld at a flat 22% federal rate (37% on amounts over $1 million annually), regardless of your normal tax bracket. This is just withholding, not your actual tax rate. If your real bracket is lower, you'll get the difference back when you file your tax return.

Yes. Submit a new W-4 to your employer anytime, no waiting for open enrollment. You can adjust filing status, claim more dependents, or add extra withholding in Step 4(c). Changes typically take effect within 1, 2 pay periods.

Pre-tax 401(k) contributions reduce federal taxable wages but NOT Social Security wages. So if you contribute to a traditional 401(k), your Social Security wages will be higher than your federal taxable wages by the contribution amount. Pre-tax health insurance and HSA contributions reduce both.

You'll get the excess back when you file your tax return, it becomes part of your refund. To get more take-home now, submit an updated W-4 with the appropriate adjustments. A large refund means you've been giving the IRS an interest-free loan.

Generally, you pay tax to both states, but most have reciprocity agreements or credits to prevent double taxation. Common scenarios: reciprocity (only pay home state), credit (work state taxes you, home state credits you for it), or remote-work specific rules. Verify with your employer and tax software at filing time.

Regular wages, overtime, and bonuses are all taxed at the same rate on your annual tax return. The difference is in withholding: overtime gets withheld at the same rate as regular pay (though one big check can trigger temporarily higher withholding), while bonuses use a flat 22% supplemental rate.