How Paychecks Work in the US: Every Deduction Explained
If you have ever looked at your pay stub and wondered where all your money went, you are not alone. The gap between your gross salary and the amount deposited into your bank account can feel enormous. This guide walks through every single deduction that appears on a typical US paycheck, using a $75,000 annual salary as a concrete example throughout.
Use our take-home pay calculator to see exactly what your paycheck looks like after all deductions.
Gross Pay vs. Net Pay
Gross pay is the total amount your employer pays you before any deductions. If you earn $75,000 per year and are paid biweekly (26 pay periods), your gross pay per paycheck is $2,884.62. Net pay (also called take-home pay) is what actually lands in your bank account after federal, state, and other deductions are subtracted.
For a single filer earning $75,000 in 2026 with no special deductions, net pay is typically between $55,000 and $60,000 per year, depending on your state. That means roughly 20-27% of your gross pay goes to various deductions.
Federal Income Tax Withholding
The largest deduction for most workers is federal income tax. Your employer uses the information on your W-4 form along with IRS Publication 15-T to calculate how much to withhold from each paycheck. The amount depends on:
- Your filing status (single, married filing jointly, head of household)
- The number of dependents you claimed on your W-4
- Any additional withholding you requested
- Pre-tax deductions that reduce your taxable income (like 401(k) contributions)
For our $75,000 single filer taking the standard deduction of $15,000, the taxable income is $60,000. Using the 2026 federal tax brackets, the annual federal income tax is approximately $8,600, or about $331 per biweekly paycheck.
Social Security Tax (OASDI)
Social Security tax is part of FICA (Federal Insurance Contributions Act) and funds retirement, disability, and survivor benefits. In 2026, the rate is 6.2% of your gross wages, up to the wage base limit of $176,100. Your employer pays a matching 6.2%.
For our $75,000 earner, the annual Social Security tax is $75,000 x 6.2% = $4,650, or about $178.85 per biweekly paycheck. Since this salary is below the wage base, every paycheck has the same deduction. If you earn above $176,100, Social Security tax stops being withheld once you hit the cap.
Medicare Tax
The other half of FICA is Medicare tax, which funds the Medicare health insurance program. The rate is 1.45% on all wages with no cap. Your employer matches this amount as well.
For our $75,000 earner: $75,000 x 1.45% = $1,087.50 per year, or $41.83 per biweekly paycheck.
High earners face an Additional Medicare Tax of 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly). The employer does not match this additional amount. Learn more with our Medicare surtax calculator.
Total FICA: The Combined Picture
Together, Social Security (6.2%) and Medicare (1.45%) total 7.65% of your gross wages. For a $75,000 salary, that is $5,737.50 per year or $220.67 per biweekly paycheck. This is a flat tax with no deductions or exemptions (except the Social Security wage base cap), so every worker pays it from their first dollar of earnings.
State Income Tax
State income tax varies dramatically. Nine states have no income tax at all (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming), while California's top marginal rate reaches 13.3%. For a detailed comparison, see our state tax comparison guide.
If our $75,000 earner lives in New York, they can expect roughly $3,500-$4,000 in state income tax. In Texas, this would be $0. This single factor can swing take-home pay by several thousand dollars a year.
Local Income Tax
Some cities and counties impose their own income taxes on top of state tax. Notable examples include New York City (3.078%-3.876%), Philadelphia (3.75%), and various cities in Ohio, Michigan, and Maryland. If our $75,000 earner works in New York City, they would owe an additional $2,200-$2,500 in city income tax.
Pre-Tax Deductions
Pre-tax deductions reduce your taxable income, meaning they lower both your income tax and (in some cases) your FICA taxes. Common pre-tax deductions include:
401(k) / 403(b) Contributions
If you contribute to a traditional 401(k) or 403(b), those contributions come out of your paycheck before federal and state income taxes are calculated. In 2026, the employee contribution limit is $24,000 ($31,500 if you are 50 or older). For details, see our 401(k) contribution limits guide.
If our $75,000 earner contributes 10% ($7,500/year), their taxable income drops to $67,500, saving roughly $1,650 in federal income tax at the 22% marginal rate. That $288.46 per biweekly paycheck only costs about $225 in reduced take-home pay because of the tax savings. Use our 401(k) calculator to model your own scenario.
Health Insurance Premiums
Most employer-sponsored health insurance premiums are deducted pre-tax under a Section 125 cafeteria plan. The average employee contribution for single coverage is about $1,400 per year ($116/month), while family coverage averages around $6,100 per year ($508/month). These amounts reduce both income tax and FICA.
Health Savings Account (HSA)
If you have a high-deductible health plan, HSA contributions are deducted pre-tax. In 2026, you can contribute up to $4,300 for self-only coverage or $8,550 for family coverage. HSAs offer a triple tax advantage: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Our HSA calculator can help you maximize this benefit.
Flexible Spending Account (FSA)
A healthcare FSA allows you to set aside up to $3,300 in 2026 for medical expenses. Dependent care FSAs allow up to $5,000 for childcare expenses. Both are pre-tax but must generally be used within the plan year.
Post-Tax Deductions
Post-tax deductions are subtracted after taxes have been calculated. They do not reduce your taxable income.
Roth 401(k) Contributions
Unlike traditional 401(k) contributions, Roth 401(k) contributions are made with after-tax dollars. You pay taxes now but withdrawals in retirement are tax-free. See our 401(k) vs Roth IRA comparison to decide which is right for you.
Disability and Life Insurance
Employer-sponsored short-term disability, long-term disability, and supplemental life insurance premiums are typically deducted post-tax. Paying these premiums with after-tax dollars means that if you ever receive disability benefits, those benefits are tax-free.
Garnishments
Court-ordered deductions such as child support, alimony, tax levies, and student loan garnishments are taken after taxes. Federal law limits garnishment to 25% of disposable earnings for most debts (50-65% for child support).
Complete Example: $75,000 Salary Breakdown
Here is what a biweekly paycheck looks like for a single filer earning $75,000 in a state with 5% flat income tax, contributing 6% to a traditional 401(k) and paying $100/month for health insurance:
| Item | Per Paycheck | Annual |
|---|---|---|
| Gross Pay | $2,884.62 | $75,000.00 |
| 401(k) (6%) | -$173.08 | -$4,500.00 |
| Health Insurance | -$50.00 | -$1,300.00 |
| Federal Income Tax | -$295.00 | -$7,670.00 |
| Social Security (6.2%) | -$178.85 | -$4,650.00 |
| Medicare (1.45%) | -$41.83 | -$1,087.50 |
| State Income Tax (5%) | -$133.08 | -$3,460.00 |
| Net Pay (Take-Home) | $2,012.78 | $52,332.50 |
In this example, only about 69.8% of gross pay ends up as take-home pay. The biggest contributors to the gap are federal income tax (10.2%), FICA (7.65%), and state income tax (4.6%).
How to Increase Your Take-Home Pay
While you cannot avoid mandatory deductions like FICA, there are legitimate strategies to increase your net pay:
- Adjust your W-4. If you consistently receive large tax refunds, you are over-withholding. Adjusting your W-4 will put more money in each paycheck instead of giving the government an interest-free loan.
- Maximize pre-tax deductions. Contributing to a traditional 401(k), HSA, or FSA reduces taxable income and lowers your tax bill.
- Claim all eligible tax credits. Credits like the Child Tax Credit, Earned Income Tax Credit, and education credits directly reduce your tax. Learn the difference between deductions and credits.
- Consider your state. If you have flexibility in where you live, state income tax differences can significantly impact take-home pay. See our guide on moving to a no-income-tax state.
Understanding Your Pay Stub
Your pay stub (or earnings statement) typically includes four sections:
- Earnings: Gross pay, including regular hours, overtime, bonuses, and commissions
- Pre-Tax Deductions: 401(k), health insurance, HSA, FSA, and commuter benefits
- Taxes: Federal income tax, Social Security, Medicare, state tax, and local tax
- Post-Tax Deductions: Roth 401(k), life insurance, garnishments, union dues
Most pay stubs also show year-to-date (YTD) totals for each category, which are essential for tracking whether you are on pace to owe additional tax or receive a refund at filing time.
Paycheck Frequency Matters
The same $75,000 salary looks different depending on how often you are paid:
- Weekly (52 pay periods): $1,442.31 gross per paycheck
- Biweekly (26 pay periods): $2,884.62 gross per paycheck
- Semi-monthly (24 pay periods): $3,125.00 gross per paycheck
- Monthly (12 pay periods): $6,250.00 gross per paycheck
While annual totals are the same, the per-paycheck deduction amounts differ. Biweekly is the most common pay frequency in the US, used by about 43% of employers.
Bottom Line
Understanding your paycheck deductions is the foundation of personal finance. Once you know where every dollar goes, you can make informed decisions about retirement contributions, tax withholding, and benefit elections. Use our take-home pay calculator or salary calculator to model your exact situation and see how different choices affect your net pay.