How Paycheck Withholding Works: 2026 Brackets, FICA & Deductions
Understanding your paycheck requires peeling back the multiple layers of federal, state, and statutory taxes deducted before your earnings hit your bank account. Many workers mistakenly assume their entire salary is taxed at their top marginal rate. In reality, the United States employs a progressive marginal bracket system, meaning your income is taxed in ascending tiers.
The 2026 Federal Standard Deduction and Marginal Rates
Before any federal income tax is assessed, the IRS exempts an initial block of income known as the standard deduction. For the 2026 tax year, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household. For a single employee earning $120,000, federal tax applies only to the remaining $103,900 of taxable income:
- 10% Bracket: Applied to the first $12,400 = $1,240.00
- 12% Bracket: Applied to income from $12,401 to $50,400 = $4,560.00
- 22% Bracket: Applied to income from $50,401 to $103,900 = $11,770.00
- Total Federal Income Tax: $1,240 + $4,560 + $11,770 = $17,570.00
FICA Taxes: Social Security and Medicare
In addition to income taxes, all US wage earners are subject to Federal Insurance Contributions Act (FICA) mandatory payroll taxes. FICA consists of two distinct components:
1. Social Security: Assessed at 6.2% of gross earnings up to the 2026 taxable wage base cap of $184,500. Employers match this 6.2% on your behalf.
2. Medicare: Assessed at 1.45% of all gross earnings without any cap. For single filers earning more than $200,000 ($250,000 for married joint filers), an Additional Medicare Tax of 0.9% applies to earnings above that threshold.
State Income Taxes and Pre-Tax Benefit Reductions
Depending on where you live and work, state income taxes range from 0% in states like Texas, Florida, and Washington to progressive rates exceeding 12% in California. Contributing to pre-tax retirement accounts like a traditional 401(k) or paying health insurance premiums reduces your taxable income, lowering your effective federal and state tax liability while building personal savings.