How to calculate payroll taxes

Step by step for one paycheck

1. Gross pay for the period: salary for the period, or hours times rate plus any extra earnings.
2. Take off pre-tax deductions, such as 401(k) contributions, to get federal taxable wages.
3. Federal income tax: annualize taxable wages, adjust for the W-4, apply the 2026 Annual Percentage Method table for the filing status, and divide back to one paycheck (Publication 15-T, Worksheet 1A).
4. Social security: 6.2% of wages until the year's total reaches $184,500.
5. Medicare: 1.45% of wages, plus 0.9% on wages over $200,000 in the year.
6. State and local income tax, if the state has one.
7. Net pay: gross pay less all of the above and any other deductions.

Worked example

A single employee on a 2026 W-4 with the Step 2 box unchecked, paid $2,000 every two weeks, in a state with no income tax:

What the employer pays on top

• Social security and Medicare: a matching 6.2% and 1.45% ($153.00 on the example paycheck).
• FUTA: 6.0% on the first $7,000 of each employee's wages in the year, less a credit of up to 5.4% for state unemployment tax paid, so usually 0.6%.
• State unemployment tax and any other state programs, which vary by state.

Questions