1. Federal income tax withholding
Your employer calculates this using the information on your Form W-4, your pay frequency and IRS withholding tables. There is no single percentage: it depends on filing status, income and adjustments. The amount withheld is a prepayment toward your final tax; you reconcile it when you file. If you had more withheld than you owe, you receive a refund. See the tax brackets guide for how the final tax is computed.
2. Social Security tax (FICA)
Employees pay 6.2% of wages up to an annual wage base, and employers pay a matching 6.2%. The wage base is $176,100 for 2025 and $184,500 for 2026, per the IRS. Wages above the base aren’t subject to the Social Security portion for the year.
3. Medicare tax (FICA)
Employees pay 1.45% of all wages with no cap, and the employer pays a matching 1.45%. An Additional Medicare Tax of 0.9% applies to wages above $200,000 (withheld by employers on wages above that amount, whatever your filing status); you reconcile at filing.
| Tax | Employee rate | Limit |
|---|---|---|
| Social Security | 6.2% | Wage base: $176,100 (2025); $184,500 (2026) |
| Medicare | 1.45% | None |
| Additional Medicare | 0.9% | On wages above $200,000 |
4. State and local income tax
Most states with an income tax require employers to withhold. Nine states have no broad wage income tax (see which states). Some cities and school districts withhold local income tax too. See our state guides.
5. Pre-tax deductions
Contributions to a traditional 401(k), HSA, or pre-tax health insurance reduce the wages subject to income tax (and sometimes FICA). That’s why your taxable wages in W-2 Box 1 can be lower than your gross pay. See HSA deduction.
How to read your W-2
- Box 1: taxable wages for federal income tax.
- Box 2: federal income tax withheld.
- Boxes 3–4: Social Security wages and tax.
- Boxes 5–6: Medicare wages and tax.
- Boxes 15–17: state wages and tax.
Is my withholding right?
Use the IRS Tax Withholding Estimator, which models your paycheck, other income and credits. If you routinely get a very large refund or owe a lot, adjust your W-4. Changes in 2025 and 2026 — like new deductions for qualifying tips, overtime and seniors, and a larger child tax credit — may be worth a fresh look at your withholding.
Supplemental wages
Bonuses and similar pay may be withheld at a flat rate (22% for most supplemental wages under the IRS optional flat-rate method) or by an aggregate method; the final tax is still settled on your return. A bonus “taxed at a higher rate” is just withholding, not a higher final tax rate.
Frequently asked questions
Why is so much taken out of my paycheck?
Federal income tax, Social Security (6.2%), Medicare (1.45%) and possibly state and local taxes plus pre-tax deductions like health insurance and 401(k).
What is the Social Security wage base for 2026?
$184,500, per the IRS.
Is a bonus taxed more than regular pay?
Withholding on bonuses may be at a flat rate, but the final tax is determined on your return using your overall income.
Official sources
- IRS Publication 15 (Circular E): Employer’s Tax Guide
- IRS Publication 505: Tax withholding and estimated tax
- IRS: Tax Withholding Estimator
- IRS: About Form W-4
- IRS: About Form W-2
General information only — not tax, legal or financial advice. Tax figures change every year; verify the current numbers at IRS.gov or with a qualified professional. Read the full disclaimer.