How Take-Home Pay Is Calculated in 2026, Step by Step
Updated for tax year 2026 · 8 min read
The order of operations matters
Most paycheck confusion comes from mixing up which taxes see which income. Federal income tax is computed on income after deductions. FICA is computed on gross wages before almost everything. State tax uses its own rules that usually resemble the federal ones but with smaller numbers. Run the layers in the right order and any paycheck becomes predictable.
1Start with gross pay
Gross pay is your salary before anything is touched: $70,000 in our example. Hourly workers get here by multiplying wage × hours × weeks ($33.65/hour × 40 × 52 is roughly the same $70,000).
2Subtract pre-tax contributions
Traditional 401(k) deferrals, most health insurance premiums, HSA and FSA contributions come out before income tax is computed. Our example skips them to keep the math visible, but every dollar here shrinks the taxable base in step 3.
3Apply the federal standard deduction
The IRS doesn't tax your whole income. For 2026, the first $16,100 (single) or $32,200 (married filing jointly) is deducted before brackets apply. $70,000 - $16,100 = $53,900 of federal taxable income.
4Walk the federal brackets
Taxable income fills the brackets from the bottom: 10% on the first slice, 12% on the next, 22% on what's left. On $53,900 of taxable income that comes to $6,570 of federal income tax. Note the blended result: far less than "22% of everything."
5Compute FICA on gross wages
Social Security (6.2%) and Medicare (1.45%) apply to gross wages, ignoring your deduction entirely. On $70,000 that's $5,355 total. This is why FICA hurts more at modest incomes than the income tax itself.
6Add state (and sometimes local) tax
Each state runs its own smaller version of steps 3 and 4 with its own deduction and brackets. Georgia's flat 5.19% after its deductions comes to $3,010. Nine states skip this step entirely; a handful of cities and counties add a local layer on top.
7What's left is take-home pay
$70,000 - $6,570 federal - $5,355 FICA - $3,010 Georgia = $55,065 per year, or $4,589 a month. An effective total tax rate of 21.3%.
The full example at a glance
| Gross annual pay | $70,000 |
| Federal income tax | −$6,570 |
| Social Security + Medicare | −$5,355 |
| Georgia state income tax | −$3,010 |
| Take-home pay | $55,065 |
Want these numbers for your own salary and state? The take-home pay calculator runs this exact pipeline for any input, and each state page documents that state's quirks.
Take-home pay FAQ
Why is my actual paycheck slightly different from calculators?+
Employer-specific items: health premiums, retirement matches, HSA/FSA elections, and your W-4 settings all shift withholding. Calculators (including ours) model the tax law itself; your employer's payroll adds your benefit elections on top.
Is overtime or a bonus taxed at a higher rate?+
No. Bonuses often have more tax withheld upfront (a flat 22% federal withholding is common), but at filing time all wage income lands in the same brackets. Extra withholding comes back as a refund if it overshot.
What percentage of my paycheck should I expect to keep in 2026?+
Most single filers between $40,000 and $120,000 keep roughly 70% to 82% of gross, depending mainly on state. No-income-tax states sit at the top of that range, California and New York City at the bottom.
Do these steps change if I'm married?+
The structure is identical; the numbers roughly double. The married standard deduction is twice the single amount and bracket thresholds are (mostly) doubled, which usually helps single-earner couples the most.