Every paycheck on earth starts as the same simple promise — a salary or an hourly rate — and ends as a smaller number that actually lands in your bank account. What happens in between is not magic, but it is strict: the layers come off in a fixed order, and getting any one of them wrong throws off everything below it. This is the exact pipeline our calculator runs, so you can audit your own paystub against it.
Step 1 — Start with gross pay
Gross pay is the full amount before anything comes out: your salary divided by the number of pay periods, or hours worked times your rate. A $75,000 salary paid bi-weekly is $2,884.62 per check; the same salary in a 27-payday year is $2,777.78. Everything downstream is computed from this number, so if the frequency is wrong, every line that follows is wrong too.
Step 2 — Subtract pre-tax deductions
Before any tax is calculated, some money leaves the check tax-free. Section 125 premiums — medical, dental and vision insurance through your employer — come out before both income tax and FICA. Traditional 401(k), 403(b) and TSP contributions come out before income tax but not before Social Security and Medicare. The order matters: shield $5,000 a year into a 401(k) and you still pay FICA on it, but you pay no income tax on it today.
Step 3 — FICA: the flat-rate layer
Social Security takes 6.2% of wages up to the 2026 wage base of $184,500 — above that line, the tax simply stops for the year. Medicare takes 1.45% of every dollar, with no cap, plus an extra 0.9% on wages above $200,000 for single filers ($250,000 married filing jointly). Your employer pays a matching share on the first two; the Additional Medicare Tax is yours alone.
Step 4 — Federal income tax withholding
This is the layer your W-4 controls. Payroll annualizes your taxable wages, subtracts the 2026 standard deduction ($16,100 single, $32,200 married filing jointly, $24,150 head of household), applies the progressive brackets — 10% through 37% — then credits dependents and adds any extra withholding you requested in Step 4(c). The result is divided back across your paychecks. A pre-2020 W-4 uses allowances instead: each one shelters $4,300 of annual income in 2026.
Step 5 — State income tax
Nine states take nothing. The rest take anywhere from a flat 2.5% (Arizona) to graduated rates topping 13.3% (California). Most offer their own standard deduction or personal exemption, and a handful conform to the federal deduction. Our engine applies each state's 2026 schedule after its own deductions and exemptions — which is why two states with the same headline rate can produce very different paychecks.
Step 6 — Local income tax, where it exists
The layer most calculators ignore. New York City, every Indiana county, most Ohio municipalities, Detroit, Philadelphia, Pittsburgh, Baltimore, St. Louis, Kansas City, Louisville, Wilmington and more all levy their own income tax — some on residents, some on anyone who works there. On a $75,000 salary, a 2% local tax is $1,500 a year. When you pick a locality in our calculator, this line appears; when you leave it blank, it is zero.
What is left is your net pay
Gross minus pre-tax deductions, minus FICA, minus federal, state and local withholding, minus any post-tax items (Roth contributions, some insurance, union dues) equals take-home. Because every layer is computed from the layer above it, one wrong input compounds. Run your own numbers in the calculator — it applies this exact pipeline with the live 2026 tables — then compare line by line with your real paystub.
Sources
- IRS Publication 15 (Circular E), Employer's Tax Guide — withholding mechanics.
- IRS Rev. Proc. 2025-32 — 2026 federal brackets and standard deductions.
- Social Security Administration — 2026 contribution and benefit base ($184,500).
- State revenue departments — 2026 individual income tax schedules, linked from each state calculator page.