According to ADP, three things come off your paycheck before the money reaches your account: federal income tax, state income tax, and FICA taxes. Each operates differently, and all three apply whether you're aware of them or not.

Federal income tax is withheld based on the information you provide on your W-4 form and calculated against the current bracket structure. For 2026, brackets for a single filer range from 10% on the first chunk of taxable income to 37% on income above $640,600. Most workers land somewhere in the 22% to 24% marginal bracket range, but their effective rate, what they actually pay as a percentage of total income, is considerably lower, because only the portion of income above each threshold gets taxed at the higher rate.

State income tax varies enormously by location. Nine states have no state income tax at all. California, at the other extreme, has a top marginal rate above 13%, and New York City adds a local income tax on top of the state rate. Two workers earning identical salaries can have take-home pay that differs by several thousand dollars annually based purely on where they live.

FICA taxes, the payroll taxes that fund Social Security and Medicare, are different from income taxes in an important way: they apply to almost everyone with wage income, regardless of tax bracket, and they're calculated on gross pay before most deductions.

The employee share is 6.2% for Social Security (on wages up to $184,500 in 2026, per the Social Security Administration) and 1.45% for Medicare on all wages. Together, that's 7.65% coming off every paycheck before income taxes are even calculated. On an $80,000 salary, that's about $6,120 a year.

For self-employed workers, the picture is harder: they pay both the employee and employer portions of FICA, totaling 15.3%, though half of that is deductible from taxable income. This is one of the reasons that a freelance income of $80,000 produces meaningfully less take-home than a salaried $80,000.

The most persistent myth about income taxes is that moving into a higher bracket means paying that rate on your entire income. It doesn't. The U.S. uses a progressive system where each bracket rate applies only to the income that falls within that range.

As one payroll resource explains it directly: being "in the 24% bracket" means your top dollar gets taxed at 24%, not your whole salary. The 10%, 12%, and 22% rates still apply to the income below those thresholds. The result is that almost everyone's effective rate, what they actually pay divided by what they earn, is lower than the bracket they're technically in.

This also explains why "a raise will push me into a higher bracket" is almost never a reason to decline more compensation. A higher bracket only affects the dollars that cross into it. Everything below that threshold stays taxed at the lower rates.

Beyond taxes, your paycheck is further reduced by any pre-tax deductions you've enrolled in. A 401(k) contribution, health insurance premium paid by the employee, HSA contributions, FSA elections, and commuter benefits all reduce your taxable income before federal and state taxes are applied. This means they cost you less than their face value. For example, a $200 monthly 401(k) contribution might only reduce your take-home by $150, depending on your tax bracket, because it also reduces your tax bill.

Health insurance in particular varies widely between employers. The average household spent $4,055 on health insurance in 2024 according to BLS data. An employer covering 100% of your premium is effectively adding thousands of dollars of value that doesn't appear on the salary line.

Your gross salary and your take-home pay are different numbers, often by 20% to 35%, depending on your state, filing status, and benefit elections. Any financial plan built on gross salary is working with inflated figures. Before you make any significant commitment based on a salary number, such as accepting a job offer, choosing an apartment, or planning a budget, run the actual take-home calculation. A paycheck calculator takes two minutes and gives you the figure that actually determines what your life can look like.