How Paycheck Calculations Work
Our calculation engine executes the exact step-by-step mathematical sequence used by modern enterprise payroll systems, running entirely inside your web browser. Here is how your gross income becomes your net take-home pay.
The 6-Step Calculation Formula
Calculate Gross Annual Earnings
For salaried workers, this is your annual contracted pay. For hourly workers, we multiply your hourly wage by regular weekly hours and 52 weeks, adding overtime hours calculated at 1.5x (or 2.0x) your base rate.
Subtract Pre-Tax Deductions
Contributions to traditional 401(k)/403(b) retirement plans, health insurance premiums, Health Savings Accounts (HSA), and Flexible Spending Accounts (FSA) are subtracted from gross earnings. This yields your Adjusted Gross Pay and lowers your tax bill.
Apply Standard Deductions
For 2026, the IRS protects the first chunk of your earnings from federal tax: $15,000 for Single filers, $30,000 for Married Filing Jointly, and $22,500 for Head of Household. Subtracting this from adjusted gross gives your Federal Taxable Income.
Calculate Federal Income Tax Using Progressive Brackets
Your taxable income is divided into brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%). Only the dollars within each bracket are taxed at that bracket's rate. Moving into a higher bracket never reduces your total net income.
Calculate FICA Payroll Taxes (Social Security & Medicare)
FICA is mandatory under federal law. Employees pay 6.20% for Social Security on wages up to $176,100 (2026 cap), and 1.45% for Medicare on all wages. Single filers earning over $200,000 pay an additional 0.90% Medicare surtax on excess wages.
Calculate State Taxes, Subtract Post-Tax Deductions, & Divide
State taxes are calculated based on your residency state rules (ranging from 0% in TX/FL to progressive brackets in CA/NY). Any post-tax deductions (such as Roth 401(k) contributions) are deducted. Finally, total annual take-home pay is divided across your pay frequency (52, 26, 24, or 12 checks).
2026 Federal Tax Brackets
Official IRS projected tax bracket schedules for individual and joint returns.
Single Filers (2026)
| Tax Rate | Taxable Income Range | Tax Calculation Formula |
|---|---|---|
| 10% | $0 to $11,925 | 10% of taxable income |
| 12% | $11,925 to $48,475 | $1,192.50 + 12% of amount over $11,925 |
| 22% | $48,475 to $103,350 | $5,578.50 + 22% of amount over $48,475 |
| 24% | $103,350 to $197,300 | $17,651.00 + 24% of amount over $103,350 |
| 32% | $197,300 to $250,525 | $40,199.00 + 32% of amount over $197,300 |
| 35% | $250,525 to $626,350 | $57,231.00 + 35% of amount over $250,525 |
| 37% | Over $626,350 | $188,769.75 + 37% of amount over $626,350 |
Married Filing Jointly (2026)
| Tax Rate | Taxable Income Range | Tax Calculation Formula |
|---|---|---|
| 10% | $0 to $23,850 | 10% of taxable income |
| 12% | $23,850 to $96,950 | $2,385.00 + 12% of amount over $23,850 |
| 22% | $96,950 to $206,700 | $11,157.00 + 22% of amount over $96,950 |
| 24% | $206,700 to $394,600 | $35,302.00 + 24% of amount over $206,700 |
| 32% | $394,600 to $501,050 | $80,398.00 + 32% of amount over $394,600 |
| 35% | $501,050 to $751,600 | $114,462.00 + 35% of amount over $501,050 |
| 37% | Over $751,600 | $202,154.50 + 37% of amount over $751,600 |
Head of Household (2026)
| Tax Rate | Taxable Income Range | Tax Calculation Formula |
|---|---|---|
| 10% | $0 to $17,000 | 10% of taxable income |
| 12% | $17,000 to $64,850 | $1,700.00 + 12% of amount over $17,000 |
| 22% | $64,850 to $103,350 | $7,442.00 + 22% of amount over $64,850 |
| 24% | $103,350 to $197,300 | $15,912.00 + 24% of amount over $103,350 |
| 32% | $197,300 to $250,500 | $38,460.00 + 32% of amount over $197,300 |
| 35% | $250,500 to $626,350 | $55,484.00 + 35% of amount over $250,500 |
| 37% | Over $626,350 | $187,031.50 + 37% of amount over $626,350 |
FICA Taxes Explained (Social Security & Medicare)
The Federal Insurance Contributions Act (FICA) mandates employee payroll contributions for federal social safety net programs:
6.20% (Capped at $176,100)
The maximum Social Security tax an employee can pay in 2026 is $10,918.20 ($176,100 × 6.2%). Wages above $176,100 have 0% Social Security withholding.
1.45% + 0.90% Surtax
Medicare has no wage cap. High earners pay an additional 0.90% surtax (total 2.35%) on earnings above $200,000 for single filers or $250,000 for married couples.