How to do accurate paycheck calculations

Here’s a concise, step‑by‑step roadmap for moving from your gross pay (“what you earn”) to your net pay (“what you take home”)—all using official IRS and SSA guidance plus our own USAPaycheckCalculator tool for quick checks. You’ll learn how to factor in pre‑tax contributions (401(k), HSA, insurance), federal withholding (using IRS tables or the online estimator), payroll taxes (Social Security/Medicare), state/local income taxes, and post‑tax deductions or garnishments—all delivered in clear USA‑specific lingo.

Overview: Gross pay versus net pay

Gross pay is the total amount an employee earns before any deductions are taken out of a paycheck (IRS Apps).
Net pay—or take‑home pay—is what lands in your bank account after federal, FICA, state/local taxes, and any pre‑ and post‑tax deductions have been withheld (IRS Apps).
All wages, salaries, tips, commissions, and other compensation you receive for personal services are included in your gross income for federal tax purposes (IRS).
Your pay stub (sometimes called a payroll register) itemizes each line: gross earnings, pre‑tax deductions, taxable wages, withholding, and final net pay (Wikipedia).

1. Gather your pay information

Pay frequency & rate

Know whether you’re paid weekly, bi‑weekly, semi‑monthly, or monthly—this determines how you divide your salary or hours worked (Wikipedia).
Confirm your hourly rate or annual salary, and track actual hours worked (including overtime at 1.5× your rate for hours over 40/week) (Wikipedia).

Withholding details (Form W‑4)

Review your most recent Form W‑4 to confirm your filing status and dependents claimed—this drives your federal income tax withholding (IRS).
Use the IRS Tax Withholding Estimator to simulate your federal withholding based on your pay, dependents, other income, and deductions (IRS).
Update your W‑4 any time you have a major life change (marriage, new child, second job) to avoid over‑ or under‑withholding (IRS).

2. Calculate gross earnings

• Salaried employees: Divide your annual salary by the number of pay periods (e.g., $60,000 ÷ 24 semi‑monthly = $2,500 per check) (Wikipedia).
• Hourly employees: Multiply hours worked by your rate, plus overtime at 1.5× for any hours over 40 in a week (Wikipedia).
• Bonuses & commissions: Add any lump‑sum payments or variable pay to your gross earnings for the period (IRS).

3. Subtract pre‑tax deductions

Pre‑tax deductions lower your taxable wages. Common examples include:

• Retirement contributions (401(k), 403(b), traditional IRA) (Wikipedia)
• Health insurance premiums (medical, dental, vision) (Wikipedia)
• Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) (Wikipedia)
  These amounts are removed from gross pay before federal and state income taxes are calculated (IRS).

4. Figure federal income tax withholding

Employers use IRS Publication 15‑T tables or the percentage method to compute withholding (IRS, IRS).

1. Taxable wages = gross earnings minus pre‑tax deductions.
2. Look up the table for your pay period (weekly, bi‑weekly, etc.) in Pub 15‑T.
3. Adjust for any extra withholding from Step 4(c) of your W‑4.
4. Subtract the result from your taxable wages to find your federal withholding.
   For an online shortcut, use the IRS Tax Withholding Estimator on IRS.gov (IRS).

5. Apply FICA: Social Security & Medicare

Social Security tax (OASDI) is 6.2% on wages up to the 2025 taxable maximum of $176,100 per person (Social Security, Social Security).
Medicare tax is 1.45% on all wages, plus an additional 0.9% Medicare surtax on wages over $200,000 (single filers) (Social Security).
Together, these payroll taxes total 7.65% of your wages up to the cap—automatically withheld each pay period (Social Security).

6. Account for state and local income taxes

State income tax rates vary widely, and nine states impose no individual income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) (Tax Foundation).
Local city or county taxes may also apply—check your state or local department of revenue website for exact withholding tables and rates (IRS).

7. Subtract post‑tax deductions & garnishments

After taxes, remove any voluntary or mandatory post‑tax deductions, such as:

• Roth contributions (Roth 401(k), Roth IRA)
• Union dues
• Wage garnishments (child support, court-ordered levies) (Wikipedia)
  The remainder is your final net pay.

Handy tools & resources

• USAPaycheckCalculator: Our own free calculator for gross‑to‑net and net‑to‑gross estimates in all 50 states: https://usapaycheckcalculator.com/
• IRS Tax Withholding Estimator: Official tool to preview federal withholding: https://www.irs.gov/individuals/tax-withholding-estimator (IRS)
• IRS Publication 15‑T (2025): Federal income tax withholding tables and methods (IRS)
• SSA OASDI Fact Sheet: Social Security and Medicare tax rates and wage base for 2025 (Social Security)
• State Department of Revenue: Search “[Your State] income tax withholding tables” on your state’s official revenue site.

Pro tips for accuracy

• Review your pay stub each period: Make sure gross earnings, deductions, and withholdings align with your expectations.
• Check year‑to‑date totals: Watch your Social Security wages approach the annual cap to avoid excess withholding.
• Reconcile at year end: Match your final pay stub to Box 1 (Wages) and Boxes 4–6 (taxes) on Form W‑2.
• Adjust withholding after life changes: Use the IRS estimator and submit a new W‑4 to your employer promptly.

Mastering these steps will help you forecast your take‑home pay, budget effectively, and avoid surprises at tax time. And when in doubt, our USAPaycheckCalculator.com is here to double‑check your math.