Understanding your paycheck — specifically why your take-home pay is significantly less than your gross salary — is fundamental personal finance knowledge. Your employer withholds federal income taxes, Social Security taxes, Medicare taxes (FICA), state income taxes, and deducts your share of health insurance premiums, 401(k) contributions, and other benefits before your net pay hits your bank account. The gap between gross pay and net take-home pay surprises most people, especially when starting a new job.

Our paycheck calculator helps you estimate your net pay per paycheck based on your gross wages, filing status, W-4 allowances, and deduction choices. This guide explains exactly what determines each line on your pay stub: federal income tax withholding brackets, FICA taxes, state withholding, pre-tax deductions like 401(k) and FSA, pay period differences, W-4 exemptions, and year-to-date tracking. Whether you're a salaried employee, hourly worker, or verifying your employer's calculations, this comprehensive breakdown covers everything.

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Table of Contents

1. What Determines Your Paycheck Amount
2. Gross Pay Calculation: Hourly and Salary
3. Federal Income Tax Withholding Explained
4. FICA Taxes: Social Security and Medicare
5. State Income Taxes by State
6. Pre-Tax Deductions: 401(k), Health Insurance, FSA
7. Post-Tax Deductions
8. Pay Period Types: Weekly, Biweekly, Semi-Monthly, Monthly
9. W-4 Form and Allowances Explained
10. Year-to-Date Paycheck Tracking
11. How to Read Your Pay Stub
12. Underpayment Penalties and Estimated Taxes
13. How to Increase Your Take-Home Pay Legally
14. Supplemental Wages: Bonuses and Overtime
15. Paycheck for Self-Employed vs. Employees
16. Common Paycheck Errors and How to Fix Them
17. FAQ — Paycheck Calculator Questions Answered

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1. What Determines Your Paycheck Amount

Your net paycheck amount is the result of multiple calculations applied in a specific order to your gross pay. The key inputs are: your gross wages (salary or hourly rate times hours worked), your W-4 filing status and withholding elections, your benefits elections (health insurance, 401k, FSA), and your state of residence. Employers use IRS-published withholding tables or software to calculate the correct withholding amounts.

The order of deductions matters: pre-tax deductions reduce your taxable income first, then federal and state taxes are calculated on the reduced figure, then post-tax deductions come out last. This hierarchy is why a $200 401(k) contribution doesn't reduce your paycheck by $200 — it reduces your taxable income, so the net paycheck reduction is only $200 minus the taxes you would have paid on that $200.

Paycheck Calculation Hierarchy

Step	Calculation	Example ($6,000 gross)
1	Start with Gross Pay	$6,000.00
2	Subtract Pre-Tax Deductions (401k, HSA, FSA)	−$600 → $5,400 taxable
3	Subtract Federal Income Tax Withholding	−$648 (est. 12%)
4	Subtract FICA (SS 6.2% + Medicare 1.45%)	−$459 (of full $6,000)
5	Subtract State Income Tax	−$270 (est. 5%)
6	Subtract Post-Tax Deductions	−$120 (Roth 401k, life ins.)
7	Net Take-Home Pay	~$3,903

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2. Gross Pay Calculation: Hourly and Salary

Gross pay is your total earnings before any taxes or deductions. For salaried employees, gross pay per pay period is the annual salary divided by the number of pay periods. For a $72,000/year employee paid biweekly, gross pay is $72,000 ÷ 26 = $2,769.23 per paycheck. For hourly employees, gross pay is the hourly rate multiplied by hours worked in the pay period, plus any overtime at 1.5x the regular rate for hours over 40 per workweek (under the Fair Labor Standards Act).

Other items added to gross pay include: tips, commissions, bonuses, on-call pay, shift differentials, and reimbursements if treated as wages. Each component is subject to withholding, though bonuses may be withheld at a flat supplemental rate of 22% for federal taxes.

Gross Pay Calculation Examples

Scenario	Calculation	Gross Pay
$60,000 salary, biweekly	$60,000 ÷ 26	$2,307.69
$60,000 salary, semi-monthly	$60,000 ÷ 24	$2,500.00
$25/hr, 40 hrs, weekly	40 × $25	$1,000.00
$25/hr, 45 hrs (5 OT), weekly	(40 × $25) + (5 × $37.50)	$1,187.50
$18/hr, 80 hrs, biweekly	80 × $18	$1,440.00

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3. Federal Income Tax Withholding Explained

Federal income tax withholding is the amount your employer withholds from each paycheck to prepay your annual federal income tax liability. The amount is based on your gross wages, filing status (Single, Married Filing Jointly, Head of Household), and any additional withholding you request on Form W-4. Employers use IRS Publication 15-T withholding tables or the IRS Tax Withholding Estimator to determine the correct amount.

The U.S. uses a progressive tax bracket system — not all income is taxed at the same rate. Only income within each bracket is taxed at that bracket's rate. A married couple earning $100,000 combined does not pay 22% on all $100,000; they pay 10% on the first portion, 12% on the next, and 22% on income above the 12% threshold.

2026 Federal Income Tax Brackets (Projected)

Tax Rate	Single Filer Income Range	Married Filing Jointly Income Range
10%	$0 – $11,925	$0 – $23,850
12%	$11,926 – $48,475	$23,851 – $96,950
22%	$48,476 – $103,350	$96,951 – $206,700
24%	$103,351 – $197,300	$206,701 – $394,600
32%	$197,301 – $250,525	$394,601 – $501,050
35%	$250,526 – $626,350	$501,051 – $751,600
37%	Over $626,350	Over $751,600

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4. FICA Taxes: Social Security and Medicare

FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare programs. Unlike income tax, FICA is a flat percentage — there's no progressive bracket structure. Every employee pays 6.2% of gross wages for Social Security (up to the annual wage base limit) and 1.45% of all wages for Medicare. Your employer matches these amounts exactly, contributing an additional 7.65% on your behalf (which you don't see on your pay stub but is part of your total compensation cost).

The Social Security wage base is the annual earnings cap above which Social Security tax no longer applies. In 2026, earnings above approximately $176,100 are not subject to the 6.2% SS tax. Medicare, however, has no wage cap and adds a 0.9% Additional Medicare Tax on earnings above $200,000 (single) or $250,000 (married filing jointly).

FICA Tax Rates 2026

Tax	Employee Rate	Employer Rate	Wage Base / Cap	Notes
Social Security	6.2%	6.2%	~$176,100 (2026)	No tax above wage base
Medicare	1.45%	1.45%	Unlimited	All wages taxable
Additional Medicare	0.9%	0%	Employee-only on earnings >$200k (single)	High earners only
Total FICA	7.65%	7.65%	Up to SS wage base	Combined employee share

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5. State Income Taxes by State

State income taxes vary significantly by location. Nine states have no state income tax (Alaska, Florida, Nevada, New Hampshire [on wages], South Dakota, Tennessee [on wages], Texas, Washington [on wages], Wyoming), while others impose rates as high as 13.3% in California. State withholding works similarly to federal — your employer withholds a portion of each paycheck based on your state W-4 equivalent (some states use the federal W-4, others have their own form).

Local taxes also apply in some jurisdictions — New York City, Philadelphia, Detroit, and other cities levy local income taxes on residents. If you work in a different state than you live, you may need to file returns in both states, though tax treaties between states often prevent true double taxation.

State Income Tax Rate Overview by Category

State Tax Category	Examples	Rate Range
No Income Tax	TX, FL, WA, NV, WY	0%
Flat Rate	CO (4.4%), IL (4.95%), PA (3.07%)	3%–5%
Low Progressive	AZ, UT, IN	2%–5%
Moderate Progressive	GA, NC, VA, OH	3%–6%
High Progressive	NY (up to 10.9%), MN (up to 9.85%)	5%–11%
Very High Progressive	CA (up to 13.3%), HI (up to 11%)	7%–13.3%

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6. Pre-Tax Deductions: 401(k), Health Insurance, FSA

Pre-tax deductions are amounts taken from your gross pay before federal and state income taxes are calculated. They reduce your taxable income, lowering your tax bill. The most common pre-tax deductions are: traditional 401(k) contributions, employer-sponsored health insurance premiums, dental and vision premiums, Health Savings Account (HSA) contributions, Flexible Spending Account (FSA) contributions, and pre-tax transit/parking benefits.

Pre-tax deductions do NOT reduce your FICA (Social Security/Medicare) taxable wages — with the notable exception of HSA contributions made through payroll, which are exempt from FICA as well as income tax. This makes HSA contributions one of the most tax-advantaged benefits available.

Common Pre-Tax Deductions and Tax Treatment

Deduction Type	2026 Contribution Limit	Reduces Federal Tax?	Reduces FICA?	Reduces State Tax?
Traditional 401(k)	$23,500 ($31,000 age 50+)	Yes	No	Usually yes
Health Insurance Premium	No set limit (employer plan)	Yes (Section 125)	Yes	Usually yes
HSA (employee contribution)	$4,300 single / $8,550 family	Yes	Yes	Usually yes
Healthcare FSA	$3,300	Yes	Yes	Usually yes
Dependent Care FSA	$5,000 household	Yes	Yes	Usually yes
Transit/Parking (pre-tax)	$325/mo each (2026)	Yes	Yes	Varies

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7. Post-Tax Deductions

Post-tax deductions are taken from your paycheck after income taxes have already been calculated and withheld. They do not reduce your taxable income. Common post-tax deductions include: Roth 401(k) contributions (taxed now, tax-free in retirement), supplemental life insurance premiums above the employer-paid base, disability insurance premiums, union dues, wage garnishments (for child support, student loans, or court orders), and voluntary charitable contributions through payroll.

Roth 401(k) contributions are unique — they are post-tax now but grow tax-free, with qualified withdrawals in retirement completely tax-free. For workers who expect to be in a higher tax bracket in retirement, Roth contributions are often more valuable despite offering no current-year tax reduction.

Post-Tax Deduction Examples

Deduction Type	Tax Treatment Now	Tax Treatment Later	Contribution Limit
Roth 401(k)	No deduction (post-tax)	Tax-free withdrawals	$23,500 combined with traditional
Supplemental Life Insurance	No deduction	N/A	No limit (payroll deduction)
Roth IRA (not payroll)	No deduction	Tax-free withdrawals	$7,000 ($8,000 age 50+)
Union Dues	No deduction	N/A	Varies
Wage Garnishment	No deduction (mandatory)	N/A	Court-ordered

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8. Pay Period Types: Weekly, Biweekly, Semi-Monthly, Monthly

The pay period type determines how often you receive a paycheck and how your annual salary is divided. Biweekly (every two weeks) is the most common pay schedule in the United States, followed by semi-monthly (twice per month), weekly, and monthly. The pay period affects your per-paycheck gross amount and how withholding tables are applied. A biweekly employee gets 26 paychecks per year; a semi-monthly employee gets exactly 24.

An important nuance: in some biweekly years, you receive 3 paychecks in a single month (a "3-paycheck month"). Plan for this — your regular monthly budget isn't disrupted, but you'll receive an extra paycheck, which is a great opportunity for savings or extra mortgage payments.

Pay Period Comparison

Pay Period	Checks/Year	Gross Per Check ($72,000/yr)	Notes
Weekly	52	$1,384.62	Most common in hourly/blue-collar
Biweekly	26	$2,769.23	Most common in U.S. overall
Semi-Monthly	24	$3,000.00	Exactly 2x/month, common in office roles
Monthly	12	$6,000.00	Less common; requires careful budgeting

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9. W-4 Form and Allowances Explained

The W-4 form (Employee's Withholding Certificate) tells your employer how much federal income tax to withhold from each paycheck. The IRS redesigned the W-4 in 2020 to eliminate the old "allowances" system and replace it with a more direct dollar-amount approach. The current W-4 asks about your filing status, whether you have multiple jobs, dependents, other income, and any additional withholding requests.

It's important to review and update your W-4 when your life changes: marriage, divorce, new child, second job, large investment income, or any event that changes your tax situation. Under-withholding results in a tax bill at filing time; over-withholding means you gave the IRS an interest-free loan (though some people prefer the large refund as forced savings).

W-4 Key Sections and Their Impact

W-4 Section	What It Does	When to Update
Step 1: Filing Status	Sets base withholding rate	Marriage, divorce
Step 2: Multiple Jobs	Increases withholding for 2nd job	When taking additional job
Step 3: Dependents	Reduces withholding via credits	New child, child ages out
Step 4a: Other Income	Withhold for non-payroll income	Side income, dividends
Step 4b: Deductions	Reduce withholding for itemized deductions	Large mortgage interest, etc.
Step 4c: Extra Withholding	Flat dollar extra withheld each period	Want to ensure no tax bill

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10. Year-to-Date Paycheck Tracking

Year-to-date (YTD) figures on your pay stub show the cumulative total of your earnings and deductions from January 1 through the current paycheck. Tracking YTD is important for several reasons: it shows when you'll hit the Social Security wage base ($176,100 in 2026), at which point your SS withholding stops for the year; it helps verify your W-2 at tax time; and it tracks how much you've contributed to 401(k), HSA, and FSA accounts relative to annual limits.

High earners should watch for the SS wage base crossover — when you hit it (typically mid-year), your FICA withholding drops from 7.65% to 1.45% (only Medicare), meaningfully increasing your take-home pay for the remainder of the year.

Year-to-Date Example Tracking ($120,000 Annual Salary, Biweekly)

Paycheck #	YTD Gross	SS Tax Still Applies?	YTD 401k	YTD Federal Tax
1 (Jan)	$4,615	Yes	$923	$416
13 (July)	$60,000	Yes	$12,000	$5,408
19 (Sept)	$87,692	Yes	$17,538	$7,892
26 (Dec)	$120,000	No (above $120k)	$23,500 (maxed)	$10,800

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11. How to Read Your Pay Stub

Your pay stub (or earnings statement) documents every component of your paycheck calculation. Understanding each section helps you verify accuracy and spot errors. The typical pay stub includes: employee and employer information, pay period dates, gross earnings (broken out by regular, overtime, bonus, etc.), pre-tax deductions with current and YTD amounts, tax withholdings (federal, state, local, SS, Medicare), post-tax deductions, net pay amount, and check/direct deposit information.

If any number looks wrong, compare it to your W-4 elections and benefit enrollment documents. Common errors include: wrong filing status, incorrect 401(k) contribution percentage, state tax withheld for wrong state, or overtime calculated at straight time instead of 1.5x.

Pay Stub Line Items Explained

Pay Stub Line	What It Means	Where It Comes From
Regular Pay	Base wages for the period	Salary ÷ pay periods, or hourly × hours
Overtime Pay	Hours over 40/wk at 1.5x	Hourly rate × 1.5 × OT hours
Federal Income Tax	Estimated annual tax ÷ pay periods	W-4 elections + IRS withholding tables
Social Security Tax	6.2% of gross (up to wage base)	FICA calculation
Medicare Tax	1.45% of all gross wages	FICA calculation
State Income Tax	State withholding	State W-4 equivalent
401(k) Pre-Tax	Your elected contribution %	Benefits enrollment form
Health Insurance	Employee's share of premium	Benefits enrollment form
Net Pay	What you actually receive	Gross minus all deductions

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12. Underpayment Penalties and Estimated Taxes

The IRS requires that income taxes be paid as you earn income throughout the year — not all at once in April. Employees generally satisfy this via withholding, but underpayment penalties can apply if too little is withheld. You'll owe a penalty if you owe more than $1,000 at filing AND you paid less than 90% of your current-year tax liability OR less than 100% of last year's tax (110% if AGI > $150,000).

The penalty rate is the federal short-term rate plus 3%. To avoid it: use the IRS Tax Withholding Estimator annually, update your W-4 after major life events, and make estimated quarterly tax payments if you have significant non-payroll income (self-employment, investments, rental income).

Underpayment Penalty Safe Harbor Rules

Safe Harbor Method	Requirement	Best For
90% of Current Year Tax	Withhold/pay 90% of what you'll owe	Predictable income
100% of Prior Year Tax	Match last year's total tax liability	Fluctuating income
110% of Prior Year (high earners)	If AGI >$150k, must match 110% of prior year	High-income taxpayers

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13. How to Increase Your Take-Home Pay Legally

There are several legal strategies to increase your net take-home pay without a raise. First, review your W-4 — if you consistently receive a large refund, you're over-withholding. Adjusting your W-4 to withhold less increases each paycheck (though you'll owe less at filing too). Second, maximize pre-tax deductions — every dollar contributed to a traditional 401(k), HSA, or FSA reduces taxable income and thus withholding. Third, enroll in a Dependent Care FSA if you have childcare expenses — this shelters up to $5,000 in pre-tax income. Fourth, elect your health insurance through a pre-tax Section 125 plan if available, rather than paying premiums post-tax.

Strategies to Legally Maximize Take-Home Pay

Strategy	Annual Tax Savings (est. 22% bracket)	Effort Level
HSA max contribution (family)	~$1,881 federal + FICA savings	Low
FSA max contribution	~$726 federal + FICA savings	Low
Dependent Care FSA	~$1,100 federal + FICA savings	Low
Pre-tax transit benefit	~$858 (at max $325/mo)	Low
Adjust W-4 (reduce over-withholding)	Timing benefit (money earlier)	Low
Traditional 401(k) vs. Roth	Current-year savings vs. future tax-free	Medium

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14. Supplemental Wages: Bonuses and Overtime

Supplemental wages — including bonuses, commissions, severance pay, vacation payouts, and overtime — are taxed differently from regular wages. The IRS allows employers to use a flat supplemental withholding rate of 22% for federal income tax on supplemental pay up to $1 million (37% above $1 million). This is simpler for payroll processing but may over- or under-withhold depending on your actual tax bracket.

Overtime pay, however, is always included in regular wage calculations for withholding purposes — your employer cannot use the flat supplemental rate for overtime. Your overtime hours push up your paycheck total, which the withholding tables treat as if you earned that much every pay period, potentially triggering higher withholding than warranted for a one-time high paycheck.

Federal Withholding on Supplemental Wages

Wage Type	Withholding Method	Federal Rate
Regular Salary/Hourly	IRS Withholding Tables	Based on W-4 and brackets
Bonus (paid separately)	Flat supplemental rate	22% federal
Bonus (combined with regular pay)	Aggregated withholding tables	Higher, based on total
Overtime Pay	Aggregated withholding tables	Based on total paycheck
Commission	Flat supplemental or aggregated	22% or bracket rate
Severance Pay	Flat supplemental rate	22% federal

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15. Paycheck for Self-Employed vs. Employees

Self-employed individuals don't receive a paycheck with automatic withholding — they must pay both the employee and employer portions of FICA taxes (totaling 15.3% up to the SS wage base) via the self-employment tax. They also pay federal and state estimated taxes quarterly. This means self-employed people need to set aside 25%–35% of net self-employment income for taxes, compared to an employee whose employer handles withholding automatically.

The self-employment tax burden is partially offset: self-employed individuals can deduct the employer-equivalent portion (7.65%) of self-employment tax from their gross income, reducing their income tax liability. They can also deduct health insurance premiums and contribute to a SEP-IRA, SIMPLE IRA, or Solo 401(k) to shelter significant income from taxes.

Employee vs. Self-Employed Tax Comparison ($80,000 Net Income)

Tax Component	Employee	Self-Employed
Social Security	6.2% (employee share)	12.4% (both shares)
Medicare	1.45% (employee share)	2.9% (both shares)
Total FICA/SE Tax	7.65%	15.3% (deduction partially offsets)
Quarterly Estimated Tax	Not required (withheld)	Required (Form 1040-ES)
Health Insurance Deduction	Pre-tax via employer plan	100% deductible (above-the-line)
Retirement Contributions	401(k) up to $23,500	SEP-IRA up to 25% of net/$69,000

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16. Common Paycheck Errors and How to Fix Them

Paycheck errors are more common than most employees realize. Studies suggest a meaningful percentage of paychecks contain errors — usually minor withholding differences, but sometimes significant calculation mistakes. Common errors include: incorrect classification (exempt vs. non-exempt for overtime), wrong hourly rate, missing overtime, incorrect state tax withholding, wrong 401(k) contribution percentage, benefit deductions applied before enrollment date, or duplicate deductions.

If you suspect an error, compare your pay stub line by line against your offer letter, benefits enrollment documents, and W-4. Contact HR or payroll immediately — payroll errors must be corrected promptly, and underpayments typically must be included in the next paycheck. Keep records of all communications for wage theft protection.

Common Paycheck Errors and Resolution

Error Type	How to Identify	How to Resolve
Wrong filing status withheld	Compare W-4 to tax withheld	Submit corrected W-4 to payroll
Missing overtime pay	Check hours worked vs. hours paid	Report to HR; state labor board if unresolved
Incorrect 401(k) deduction	Compare enrollment form to pay stub	Contact benefits administrator
Wrong state tax withheld	Verify state on pay stub vs. work location	Submit state withholding form update
Benefits deducted too early/late	Check enrollment effective date	Contact HR/payroll for retroactive correction

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17. FAQ — Paycheck Calculator Questions Answered

Why is my take-home pay so much less than my salary?

Multiple deductions reduce your gross salary to net pay: federal income tax (10%–37%), FICA taxes (7.65%), state income tax (0%–13%+), health insurance premiums, and 401(k) contributions. A $72,000 salary in a moderate-tax state with standard deductions typically results in take-home pay of roughly $52,000–$55,000 per year — about 72%–76% of gross.

How do I calculate my biweekly paycheck?

Divide your annual salary by 26 to get gross pay per biweekly paycheck. Then subtract: pre-tax deductions (401k, health insurance), federal withholding (using IRS tables based on your W-4), FICA (7.65% of gross), state tax, and any post-tax deductions. The result is your net paycheck. Our paycheck calculator automates this calculation instantly.

What is FICA tax and can I opt out?

FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare. As an employee, you cannot opt out — they are mandatory. The employee share is 7.65% (6.2% SS + 1.45% Medicare). Your employer matches this. Certain groups (student employees, some government employees) may be exempt in limited circumstances.

How does a 401(k) contribution affect my paycheck?

A traditional 401(k) contribution reduces your taxable income, so federal and state income tax withholding decreases. A $500/paycheck 401(k) contribution doesn't reduce your take-home pay by $500 — it reduces it by $500 minus the taxes you would have paid on that $500. At a 22% combined tax rate, a $500 pre-tax contribution reduces take-home pay by approximately $390.

What is the standard deduction for 2026?

For tax year 2026, the projected standard deduction is approximately $15,000 for single filers and $30,000 for married filing jointly (adjusted for inflation annually). This is subtracted from your gross income before applying tax brackets, significantly reducing taxable income for most taxpayers.

How can I get a bigger tax refund?

To get a larger refund, increase your withholding by submitting a new W-4 with fewer adjustments or adding extra withholding in Step 4c. However, a large refund means you over-withheld — essentially giving the government an interest-free loan. Better to withhold correctly and invest the difference throughout the year.

Does my state have income tax?

Nine states have no state income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. All other states levy state income tax ranging from under 3% (North Dakota, Arizona) to over 13% (California). Local taxes may also apply in certain cities.

What happens if I claim exempt on my W-4?

Claiming exempt on your W-4 stops all federal income tax withholding. You can only do this legitimately if you had zero tax liability last year AND expect zero liability this year. If you claim exempt incorrectly, you'll owe a large tax bill plus potential underpayment penalties at filing. FICA taxes still apply regardless of exempt status.

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Educational disclaimer: The paycheck calculation information on this page is for educational and illustrative purposes only and does not constitute tax or financial advice. Tax laws, withholding rates, and contribution limits change annually. The federal tax bracket figures used are based on 2026 projections and are subject to change by IRS inflation adjustments. Always verify current rates with the IRS website (irs.gov) and your state's department of revenue. Consult a licensed tax professional or CPA for personalized tax advice specific to your situation.