Most people know their salary, but few know exactly how much of it ends up in their bank account after taxes and deductions. Your paycheck is shaped by several layers: Social Security, Medicare, federal income tax, and often state or local taxes. Add in retirement contributions or health insurance, and the numbers can get confusing fast.
This step-by-step guide walks you through the process of calculating your paycheck after taxes in 2025. We’ll start from your gross pay and move through each deduction—FICA, federal withholding, and state tax—so you can clearly see how your take-home pay is calculated. Whether you’re paid hourly or salaried, weekly or bi-weekly, this method will help you understand your net income and budget with confidence.
Why Calculating Net Pay Matters
Most of us see a salary number on paper, but our actual paycheck looks very different. Between federal taxes, Social Security, Medicare, state income tax, and deductions, your take-home pay is often much lower than your gross pay. Understanding how each layer of tax works helps you budget better, avoid surprises, and even make smarter financial choices.
Step 1 — Find Your Gross Pay
- Salary employees: Divide annual salary by the number of pay periods (monthly, bi-weekly, etc.).
- Hourly workers: Multiply hourly wage × hours worked. Don’t forget overtime, bonuses, or commissions if they apply.
Example: $60,000 salary ÷ 24 semi-monthly checks = $2,500 gross per paycheck.
Step 2 — Subtract Pre-Tax Deductions
Pre-tax contributions reduce your taxable income before taxes are calculated. Common examples include:
- 401(k) or 403(b) retirement plans
- Health, dental, and vision premiums
- HSA or FSA contributions
These lower your income for federal and state taxes, though they don’t reduce Social Security or Medicare contributions.
Step 3 — Apply FICA Taxes (Social Security & Medicare)
- Social Security: 6.2% of wages, capped at $176,100 in 2025.
- Medicare: 1.45% of all wages.
- Additional Medicare tax: 0.9% if you earn over $200,000 as a single filer (or $250,000 for joint filers).
Step 4 — Calculate Federal Income Tax Withholding
Federal tax is based on your W-4 filing status and the 2025 IRS tax brackets. Steps:
- Annualize taxable wages.
- Subtract the standard deduction ($15,000 for single, $30,000 for married filing jointly in 2025).
- Apply the correct tax brackets to find estimated withholding.
- Divide back down by your pay periods.
Step 5 — Add State and Local Taxes
State and city rules vary:
- Some states (like Florida and Texas) don’t tax wages.
- Others (like California or New York) use progressive brackets.
- Certain cities (e.g., New York City, Philadelphia) add local income tax.
👉 If you want the exact breakdown, try the California take-home pay calculator or the NYC bi-weekly paycheck estimator.
Step 6 — Subtract Post-Tax Deductions
These come out after taxes:
- Roth 401(k) contributions
- Union dues
- Wage garnishments
- Charitable deductions through payroll
Step 7 — Arrive at Net Pay (Take-Home Pay)
Formula recap:Net Pay = Gross Pay
– Pre-Tax Deductions
– FICA (Social Security & Medicare)
– Federal Income Tax
– State/Local Tax
– Post-Tax Deductions
Worked Example (Bi-Weekly Salary)
- Gross pay: $2,692
- 5% 401(k): –$134
- FICA: –$206
- Federal withholding: –$240
- State tax (example CA, mid-bracket): –$150
= Net Pay ≈ $1,962
FAQs
What’s the difference between gross pay and net pay?
Gross pay is before taxes/deductions; net pay is your final paycheck.
How much do Social Security and Medicare take?
Together, 7.65% of wages (6.2% SS + 1.45% Medicare).
Does my state always tax paychecks?
No. States like Texas, Florida, Alaska, Nevada, and Washington don’t tax wages.
What’s the fastest way to calculate after-tax pay?
Use a paycheck calculator with your pay frequency and deductions. Try the 2025 federal withholding changes page for updated tax info.
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Bettye is the creator of CityPaycheckCalculator.com, a resource designed to help individuals quickly and accurately estimate their take-home pay across U.S. cities. With a strong focus on clarity, accuracy, and user experience, Bettye provides reliable paycheck calculators and helpful insights to support smarter financial decisions. Her mission is to make complex payroll and tax information simple and accessible for everyone.