Every paycheck follows the same order of operations. Knowing it makes your pay stub easy to read and helps you predict how a raise or a 401(k) change will affect what lands in your account.
1. Start with gross pay
Gross pay is your salary divided by the number of pay periods, or your hourly rate times hours worked. A $65,000 salary paid bi-weekly is $2,500 per paycheck before anything is taken out.
2. Subtract pre-tax deductions
Traditional 401(k) or 403(b) contributions, HSA contributions and most employer health premiums come out before income tax. They lower the income that federal (and usually state) tax is calculated on. Health premiums and HSA contributions through a cafeteria plan are also exempt from Social Security and Medicare; 401(k) deferrals are not.
3. Federal income tax withholding
Your employer annualizes your taxable pay, subtracts the 2026 standard deduction ($16,100 single, $32,200 married filing jointly, $24,150 head of household) and applies the progressive brackets from 10% to 37%. Amounts from your W-4, such as dependent credits or extra withholding, adjust the result.
4. FICA: Social Security and Medicare
Social Security takes 6.2% of wages up to $184,500 in 2026. Medicare takes 1.45% of all wages, plus 0.9% on wages above $200,000. See our FICA guide.
5. State and local taxes
Nine states do not tax wages. The rest use a flat rate or brackets, and some cities and counties add their own tax. Pick your state in the calculator to see the effect.
6. Post-tax deductions
Roth 401(k) contributions, union dues or wage garnishments are taken after taxes. What remains is your net pay.