Paycheck Calculator Guide: How Take-Home Pay Is Actually Calculated
The exact order taxes come out of a paycheck — pre-tax deductions, federal tax, FICA, and state tax — with a full worked example from gross to net.
Take-home pay is built from a specific sequence of subtractions, not one single tax rate — understanding the order explains why two people with the same gross salary can end up with noticeably different net pay.
The order of operations
- Start with gross pay — salary or hours × rate.
- Subtract pre-tax deductions — 401(k), health insurance, HSA/FSA — these come off before tax is calculated.
- Subtract the standard deduction to find federal taxable income, then apply progressive federal tax brackets.
- Subtract FICA — 6.2% Social Security (up to the annual wage base) plus 1.45% Medicare.
- Subtract state income tax, if your state has one.
Full worked example
A single filer in California earning $70,000/year, paid biweekly, contributing $2,400/year to a 401(k):
| Step | Amount |
|---|---|
| Gross annual pay | $70,000.00 |
| − 401(k) contribution | $2,400.00 |
| − Federal tax (on $52,600 taxable) | $6,486.00 |
| − FICA (Social Security + Medicare) | $5,355.00 |
| − California state tax (est.) | $4,056.00 |
| = Net annual pay | $51,703.00 |
Divided across 26 biweekly paychecks, that's $1,988.58 take-home per paycheck out of $2,692.31 gross — an effective combined tax rate of about 22%.
Run your own salary, state, and deductions through the Paycheck Calculator to see the same breakdown instantly.