Every paycheck you receive has already been reduced by at least three federal taxes: federal income tax, Social Security, and Medicare. Together these are called withholding. Your employer sends them to the IRS and the Social Security Administration on your behalf — you never handle the money. The amounts are estimates of your annual tax liability divided across your pay periods.
Federal Income Tax Withholding
Employers calculate federal income tax withholding using IRS Publication 15-T, “Federal Income Tax Withholding Methods.” The IRS updates this publication each January. Two methods are available:
- Wage bracket method — the employer looks up your annualized wage and W-4 filing status in a table and finds the withholding amount.
- Percentage method — the employer converts your pay to an annualized amount, subtracts a “tentative withholding adjustment” based on your W-4, then applies the tax brackets and divides the result by your pay periods.
Both methods are designed to produce approximately the right full-year withholding if your pay, filing status, and deductions stay constant. The actual tax you owe is determined when you file.
Social Security and Medicare (FICA)
FICA withholding is straightforward — it is a flat percentage of wages up to certain limits:
| Tax | Rate | 2026 Limit |
|---|---|---|
| Social Security | 6.2% | First $184,500 of wages |
| Medicare | 1.45% | No limit |
| Additional Medicare | 0.9% | Wages above $200,000 (single) / $250,000 (MFJ) |
Source: SSA 2026 COLA Fact Sheet; Rev. Proc. 2025-32.
Your employer withholds the Additional Medicare Tax once your wages from that employer exceed $200,000 in the calendar year — regardless of your filing status. If your combined wages from all jobs stay under the threshold but you owe it because of your filing status (for example, married filing separately, threshold $125,000), you will pay it when you file.
How Withholding Is Calculated Each Period
Here is a condensed version of the percentage method for a single employee earning $3,000 every two weeks in 2026, with no W-4 adjustments:
- Annualize: $3,000 × 26 = $78,000
- Subtract the standard-deduction equivalent for withholding purposes (Pub 15-T Table for 2026): approximately $16,100 for single
- Annualized taxable: $78,000 − $16,100 = $61,900
- Apply 2026 brackets (single):
- 10% × $12,400 = $1,240
- 12% × $38,000 = $4,560
- 22% × $11,500 = $2,530
- Annualized withholding: $8,330
- Per-period withholding: $8,330 ÷ 26 = $320.38
- Add FICA: $3,000 × 6.2% = $186.00 SS + $3,000 × 1.45% = $43.50 Medicare
- Total withheld: $320.38 + $186.00 + $43.50 = $549.88
This is an estimate — the employee will reconcile the exact amount at filing time.
What Reduces Withholding
These items lower the wages used for income tax withholding (and sometimes FICA too):
| Deduction | Lowers income tax withholding? | Lowers FICA? |
|---|---|---|
| Traditional 401(k) | Yes | No |
| Section 125 (health, dental, vision, FSA, HSA) | Yes | Yes |
| Roth 401(k) | No | No |
| After-tax life insurance premium | No | No |
Claiming additional deductions or credits on your W-4 (Step 3 or Step 4) also lowers each paycheck’s withholding.
Withholding vs. Final Tax Liability
Withholding is not the same as what you owe. It is an advance payment. When you file your return:
- Your total income from all sources is combined.
- Deductions, credits (like the Child Tax Credit), and adjustments are applied.
- If withholding exceeds your final tax: you get a refund.
- If withholding is short: you owe the balance due.
A large refund means you gave the government an interest-free loan. A large balance due — especially over $1,000 — can trigger an underpayment penalty. Use the IRS Tax Withholding Estimator or the federal income tax calculator to check whether your withholding is on track.
State and Local Withholding
Most states with an income tax also require payroll withholding. Your employer uses each state’s withholding tables (analogous to Pub 15-T). Some states also require employee contributions to disability insurance or paid-leave programs — these appear as separate lines on your pay stub.
For a complete picture of your paycheck — including state taxes and payroll deductions — use the paycheck calculator.