Every deduction on a US paycheck, explained

Between gross pay and direct deposit sit up to seven deductions. Knowing which are taxes, which are savings, and which reduce the others is the difference between reading your paystub and guessing.

Federal income tax withholding

Withheld per paycheck using IRS Publication 15-T tables and your Form W-4 (filing status, dependents, extra withholding). Withholding is an estimate of your annual liability: the yearly truth is brackets plus deductions, settled at filing. Big refunds mean you over-withheld all year; a big bill means the W-4 was off, common with two jobs or bonuses.

FICA: Social Security and Medicare

Social Security: 6.2% of wages up to $184,500 (2026): high earners see this line stop late in the year. Medicare: 1.45% on everything, plus 0.9% withheld above $200,000. Employers match both (minus the 0.9%). FICA ignores your 401(k): retirement savings reduce income tax, not payroll tax.

State and local tax

In our state data, 9 states withhold nothing from wages and 14 use one flat rate; the rest are progressive, topping out above 10% in California and New York. Seventeen states also allow city or county income taxes: New York City adds up to 3.876%, Philadelphia 3.75%. Some states additionally deduct disability or paid-leave premiums (California SDI 1.3%, New Jersey, New York, Washington and others).

Pre-tax benefits: the order matters

  • Section 125 health/dental/vision premiums: reduce federal, most state, and FICA wages, the most tax-efficient dollar on the stub.
  • Traditional 401(k) ($24,500 limit 2026): reduces income tax now, not FICA; Roth 401(k) is post-tax.
  • HSA ($4,400/$8,750): triple tax-free, and FICA-free through a cafeteria plan.
  • FSA, commuter benefits: pre-tax within their own limits.

A worked example

Single, $80,000, no benefits: federal income tax $8,770, Social Security $4,960, Medicare $1,160, take-home $65,110 federally, before state tax. Add a 6% traditional 401(k) and take-home drops by $3,744, not the full $4,800, because every deferred dollar escapes your 22% bracket. Model your own numbers in the paycheck calculator.

Frequently asked questions

Does a traditional 401(k) contribution reduce Social Security and Medicare tax?

No. Traditional 401(k) deferrals reduce your federal and most state income taxes, but FICA (Social Security at 6.2% and Medicare at 1.45%) is still calculated on your gross wages before the 401(k) deduction.

When does Social Security withholding stop for the year?

Social Security tax applies only to wages up to the annual wage base. Once your cumulative earnings reach that threshold, the Social Security line stops until January of the following year.

Which pre-tax benefit gives the greatest tax saving on a US paycheck?

Section 125 health, dental and vision premiums are the most tax-efficient because they reduce federal income tax, most state income taxes and FICA all at once, unlike a 401(k) which does not reduce FICA.

Sources: IRS Pub 15-T (2026); SSA wage base; Tax Foundation state tables. Last updated 2026-11-04.