Understanding Your 2026 Paycheck: FICA, Deductions, and Net Income

Understanding how your hard-earned money gets divided before it reaches your checking account can help you budget better. Let's break down the typical deductions on a W-2 paycheck.

1. Gross Pay vs. Net Pay

Gross Pay is the total amount of money you earn before any deductions or taxes are withheld. This is your salary or hourly rate times hours worked. Net Pay (also called take-home pay) is what is actually deposited into your account after all withholdings are subtracted.

2. FICA Withholdings

FICA (Federal Insurance Contributions Act) is a mandatory payroll tax split between employers and employees to fund federal programs:

• Social Security: 6.2% is deducted from your gross pay up to the annual limit. For 2026, the wage cap is $184,500.
• Medicare: 1.45% is deducted from all of your earnings. In addition, an extra 0.9% Additional Medicare tax applies on earnings over $200,000 for single filers ($250,000 for married joint filers).

3. Federal and State Tax Withholding

Your employer subtracts federal and state income tax based on the information you filled out on your W-4 form. Federal rates are progressive (ranging from 10% to 37% in 2026). State taxes vary widely; some states have progressive brackets, others have flat rates, and nine states have no wage tax at all (like Texas and Florida).