Payroll taxes that are taken out of most paychecks before the employee even sees their paycheck typically include the following:
- Income Tax (Federal): 10% to 37%
- Income Tax (State): 0% to 12.33%, depending upon your state
- Income Tax (Local): 0% to 10%, depending upon your city/town
- Medicare: 1.45% of your gross pay**
- Social Security: 6.2% of your gross pay
Sometimes, the Medicare and Social Security taxes can show as a combined FICA tax (Federal Insurance Contributions Act). FICA simply add the 1.45% Medical tax to the 6.2% Social Security tax to equal 7.65%.
Additional deductions many employees might see from their paycheck into contributions to their employer’s retirement program (401k, 403b, pension, etc.), a flex spending account or health savings account (HSA) deduction, and life insurance premiums. Less common deductions include garnishments, charitable contributions, and job-related expenses such as union dues, uniforms, and meals.
Maximize Your Paycheck
While the FICA taxes are the same for every employee across the country, your income taxes will vary depending upon two figures:
- Your income. Most, though not all, states have tax brackets, meaning that the more income you earn, the higher the percentage of your income you will pay in taxes. The alternative in a few states is known as a flat tax where everyone pays the same percentage of their paycheck in tax, regardless of income.
- Withholdings claimed: Each year, you should complete the IRS’s W-4 form, specifying how many qualified dependents and other dependents you claim. Each dependent you claim will lower your taxable income by a set dollar amount, meaning the government will take fewer taxes out of each paycheck. You may also identify an additional amount of deductions to lower your taxable income if you expect to claim any deductible expenses beyond the standard deductions on your tax returns.
*Figures based on 2021 publications
** High-income earners pay an additional small percentage in Medicare tax
