Understanding Your Take-Home Pay

What comes out of your paycheck

Three main taxes reduce a typical paycheck before you see it. Understanding each one — and how they interact — is the difference between comparing gross salaries and comparing what you actually keep.

Federal income tax is progressive, meaning higher portions of your income are taxed at higher rates. For tax year 2024, the IRS brackets for a single filer start at 10% on income up to $11,600, then 12% up to $47,150, 22% up to $100,525, 24% up to $191,950, and rising to 37% on income above $609,350. But you don't pay the top rate on everything — each bracket only applies to the income within that slice.

Before any bracket is applied, the standard deduction reduces your taxable income. For 2024, that's $14,600 for single filers and $29,200 for married filing jointly (IRS Rev. Proc. 2023-34). This means a single filer earning $77,719 pays federal tax on only $63,119 — the first $14,600 is untaxed.

FICA is the payroll tax that funds Social Security and Medicare. Social Security takes 6.2% of wages up to a cap of $168,600 (2024). Medicare takes 1.45% on all wages, plus an additional 0.9% on earnings above $200,000 for single filers. Unlike income tax, FICA has no standard deduction — it applies from the first dollar.

State income tax varies more than any other line item. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no income tax on wages. Others charge a flat rate: Arizona 2.5%, Colorado 4.4%, North Carolina 4.5%, Pennsylvania 3.07%. The highest-tax states like California and New York use progressive brackets that can reach 10–13% on high incomes.

A real example: $85,000 single in three states

Let's trace an $85,000 salary through the math for three states to see how much location matters. The federal and FICA portions are the same everywhere; only state tax changes.

Federal: the standard deduction of $14,600 reduces taxable income to $70,400. Applying the 2024 brackets: 10% on the first $11,600 ($1,160), 12% on $11,600–$47,150 ($4,266), and 22% on $47,150–$70,400 ($5,075). Total federal income tax: $10,501.

FICA: 6.2% Social Security on $85,000 = $5,270, plus 1.45% Medicare = $1,232.50. Total FICA: $6,502.50.

In Texas (no state income tax): take-home = $85,000 − $10,501 − $6,502.50 = $67,996.50. That's about 80% of gross.

In Colorado (flat 4.4%): state tax = $85,000 × 0.044 = $3,740. Take-home = $64,256.50 — about $3,740 less than Texas.

In California (progressive, top marginal 9.3% at this income): state tax is roughly $5,800–6,200 depending on deductions. Take-home ≈ $61,800 — about $6,200 less than Texas for the same salary.

The spread between no-tax Texas and high-tax California on an $85,000 salary is over $6,000/year. That's a car payment or a significant chunk of rent. This is why comparing take-home — not gross — is the honest way to weigh a move or offer.

Why state matters so much

Texas, Florida, Washington, Nevada, and four other states have no income tax on wages, so your take-home is higher there for the same salary. High-tax states like California or New York can take an extra 5–10% of gross income. Over a year, that's thousands of dollars.

But no-income-tax states often compensate with other revenue: higher property taxes (Texas), higher sales tax (Tennessee, Washington), or tourism and energy revenue (Alaska, Nevada). The total tax burden may be closer than the income-tax line suggests. For take-home pay specifically, though, the state income tax is what shows up on your paycheck — and it's the number that matters for month-to-month budgeting.

Our state tax pages break this down for all 50 states plus DC, with the actual brackets or flat rate and an embedded take-home calculator pre-filled for that state.

Marginal vs. effective rate — the common confusion

Your marginal rate is the rate on your last dollar earned — the bracket you fall into. Your effective rate is your total tax divided by your gross income. These are almost always different, and confusing them leads to bad decisions.

Using the $85,000 Texas example: the marginal federal rate is 22% (the bracket $100,525 falls into for taxable income of $70,400). But the effective federal rate is $10,501 ÷ $85,000 = 12.4%. The 22% bracket doesn't mean you pay 22% on everything — only on the portion above $47,150.

This matters when you're evaluating a raise. If you're at $95,000 and get a $10,000 raise, that $10,000 falls in the 24% bracket (above $100,525). You'll pay 24% federal on that portion — not your 12.4% effective rate. But the rest of your income is taxed the same as before. A raise never reduces your take-home by pushing you into a higher bracket.

Self-employment changes the math

If you're self-employed or a contractor, you pay both halves of FICA — the employee's 6.2% + 1.45% and the employer's matching 6.2% + 1.45%. This is the self-employment tax, totaling 15.3% on net earnings up to the Social Security wage cap ($168,600 for 2024).

You can deduct half of the self-employment tax on your federal return, which softens the blow slightly. But the bottom line: a $85,000 W-2 salary and $85,000 in self-employment income produce very different take-home numbers, because the self-employed person is paying the full FICA load.

Quarterly estimated tax payments are usually required for self-employed income — the IRS expects you to pay as you earn, not in one lump at year-end.