How to Read Your Paycheck: Gross Pay to Take-Home Pay
6 min read · Last reviewed August 20, 2026
A pay stub packs a lot into a few lines: gross pay, one or more pre-tax deductions, federal (and often state) income tax, Social Security, Medicare, and finally net pay. Each line does something different, and mixing them up is where most confusion about 'why is my paycheck so much smaller than my salary' comes from.
This guide walks through the pipeline from gross pay to take-home pay in order, using the 2026 federal figures, and works a full example so every number has a source.
Start with gross pay
Gross pay is your full pay for the period before anything is taken out — the number in your offer letter or hourly rate times hours worked, annualized by however often you're paid: 52 times a year if weekly, 26 if biweekly, 24 if semimonthly, or 12 if monthly.
Pre-tax deductions come out first
Before federal income tax is calculated, certain deductions — most commonly a traditional 401(k) contribution — are subtracted from gross pay. This lowers the income that federal tax is calculated on, but it typically does not lower the wages that Social Security and Medicare tax are calculated on. A Roth 401(k) contribution, by contrast, is not pre-tax at all — it comes out after tax.
Federal income tax: progressive, not flat
What remains after pre-tax deductions and the standard deduction is your federal taxable income, taxed through the 2026 bracket table — 10% on the first slice, 12% on the next, and so on up to 37%. Only the portion of income inside each bracket is taxed at that bracket's rate; see the companion guide on marginal versus effective tax rate for the full mechanics.
FICA: Social Security and Medicare
Separately from income tax, FICA takes 6.2% for Social Security — but only up to the 2026 wage base of $184,500, after which Social Security withholding stops for the rest of the year — and 1.45% for Medicare, which has no cap at all. Above $200,000 of wages (single) or $250,000 (married filing jointly), an extra 0.9% Additional Medicare Tax applies on the excess. Unlike federal income tax, FICA is a flat percentage of wages with no brackets.
Worked example
A single filer paid $3,000 gross every two weeks, with a $200 traditional 401(k) contribution each paycheck: annual gross pay is $78,000, and annual pre-tax deductions are $5,200. Federal taxable income is $78,000 − $5,200 − the $16,100 standard deduction = $56,700, which comes to $7,186 of federal tax. Social Security tax is 6.2% of the full $78,000 gross = $4,836, and Medicare tax is 1.45% of $78,000 = $1,131. Total tax is $13,153, leaving $59,647 a year — about $2,294.12 every two weeks — as take-home pay.
Frequently asked questions
▶Why is Social Security calculated on gross pay but federal tax on a smaller number?
Because pre-tax deductions like a traditional 401(k) reduce federal taxable wages but not Social Security or Medicare wages — those two systems use different definitions of 'wages'.
▶Does this guide cover state income tax?
No. State and local income tax rules vary too widely by jurisdiction to cover in a general guide — check your own state's rules or pay stub for that line.
▶Why did my Social Security withholding stop partway through the year?
Once your year-to-date wages reach the Social Security wage base ($184,500 for 2026), no further Social Security tax is withheld for the rest of the year. Medicare withholding continues on every dollar, since it has no cap.
▶Is my paycheck's withholding the same as my actual tax bill?
Not necessarily. Withholding is an estimate collected in advance based on your Form W-4 elections; your actual tax liability is settled when you file, which is why some people get a refund and others owe more.
Try the calculators
Estimate 2026 US take-home pay after federal income tax, Social Security and Medicare, for any pay frequency.
Open calculator →Calculate 2026 self-employment tax — Social Security and Medicare on 92.35% of net profit, plus the Additional Medicare Tax where it applies.
Open calculator →See the difference between your marginal tax bracket and your actual effective tax rate for 2026, with a full bracket-by-bracket breakdown.
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