Plain-English Guides
No jargon. No fluff. Just clear explanations of how your taxes, deductions, and take-home pay actually work in 2026.
Your gross pay is your full earnings before any deductions — what you agreed to when you took the job. Your net pay (take-home) is what actually lands in your bank account after taxes and deductions are taken out. For most full-time workers, the gap between gross and net is 20–35%.
Federal income tax is based on your annual income, filing status, and W-4 elections. State income tax varies — 9 states have none, others go as high as 13.3% (California). FICA taxes cover Social Security (6.2% up to $176,100) and Medicare (1.45%, plus 0.9% over $200k). These are non-negotiable regardless of your W-4.
Pre-tax deductions like 401(k), health insurance, FSA, and HSA reduce your taxable income before taxes are calculated — saving you money twice. Post-tax deductions like Roth 401(k) or life insurance come out after taxes with no immediate tax benefit.
YTD (Year-to-Date) columns track your running totals from January 1st. They're useful for verifying your annual tax liability when filing, and for checking whether you've hit contribution limits (e.g., the 2026 401(k) limit of $23,500).
Quick check: Add up all deductions on your stub and subtract from gross. The result should match your net pay. If it doesn't, contact your payroll department.
Weekly (52 checks/yr), biweekly (26), semi-monthly (24), or monthly (12). Biweekly is most common. Some months have 3 pay periods — budget around net annual income, not per-check amounts.
Calculate my take-home →The biggest misconception: entering a higher bracket doesn't tax your entire income at that rate. Only the income within each bracket is taxed at that rate. The brackets are stacked — you fill the lower ones first.
A single filer with $80,000 taxable income pays: 10% on the first $11,925, then 12% on income from $11,926–$48,475, then 22% on the rest up to $80,000. Their marginal rate is 22%, but their effective rate is closer to 17%.
10%: $0–$11,925 · 12%: $11,926–$48,475 · 22%: $48,476–$103,350 · 24%: $103,351–$197,300 · 32%: $197,301–$250,525 · 35%: $250,526–$626,350 · 37%: over $626,350.
Before brackets apply, you subtract your standard deduction (2026: $15,000 single, $30,000 married filing jointly). A single person earning $70,000 has taxable income of $55,000 after the standard deduction.
Key insight: Your effective rate is always lower than your marginal rate. Focus on your effective rate when comparing job offers or planning major financial decisions.
Pre-tax 401(k) contributions, HSA contributions, student loan interest (up to $2,500), and itemized deductions (mortgage interest, charitable gifts, state taxes up to $10,000) all reduce the income that gets taxed. Every dollar of pre-tax deduction saves you money at your marginal rate.
Calculate my federal tax →The W-4 determines how much federal income tax your employer withholds from each paycheck. It does not affect FICA (Social Security and Medicare) — those are always 7.65% and can't be changed.
The 2020 redesigned W-4 eliminated "allowances." Now you directly enter dollar amounts: multiple jobs, dependents, other income, and extra withholding. More accurate but also more confusing.
File a new W-4 when you: get married or divorced, have a child, take a second job, start freelancing, buy a home, or experience any major income change. The IRS recommends reviewing your withholding annually.
If you or your spouse have multiple jobs, each employer withholds as if that job is your only income — which leads to under-withholding because you're actually in a higher bracket combined. Use Step 2 of the W-4 or the IRS Tax Withholding Estimator to correct this.
The goal: Owe $0 and get $0 refund. A large refund means you over-withheld — you gave the government an interest-free loan. A large bill means you under-withheld and may owe a penalty.
You can claim exempt only if you had no federal tax liability last year AND expect none this year. This is only valid for very low earners. Claiming exempt when you shouldn't is illegal and will result in a large tax bill plus penalties.
Check my withholding →Alaska, Florida, Nevada, New Hampshire (wages only), South Dakota, Tennessee (wages only), Texas, Washington, and Wyoming have no state income tax on wages. If you live and work in one of these states, your paycheck only faces federal taxes and FICA.
Flat-rate states apply one rate to all taxable income: Colorado (4.4%), Illinois (4.95%), Pennsylvania (3.07%), Utah (4.85%). Graduated states work like federal brackets — higher income faces higher rates. California tops out at 13.3% for income over $1M.
Your state income tax is generally based on your state of residence. If you live in New Jersey but work in New York, you pay NY state tax at the source, then file a NJ return and get a credit — avoiding double taxation, but still paying the higher of the two rates.
Remote workers: If your employer is in a high-tax state but you've moved to a no-tax state, you may still owe that state's taxes depending on their "convenience of the employer" rules. New York is the most aggressive enforcer.
Several cities layer on top of state tax: New York City (up to 3.876%), Philadelphia (3.75%), Cleveland (2%), and others. These are often withheld automatically but easy to miss when moving to a new city.
Compare state taxes →Traditional (pre-tax) 401(k) contributions reduce your taxable income dollar-for-dollar. If you earn $80,000 and contribute $10,000, you're only taxed on $70,000. At a 22% marginal rate, that's $2,200 in immediate tax savings — on top of the investment growth.
Employee limit: $23,500. Catch-up (age 50+): Additional $7,500, total $31,000. New for ages 60–63: super catch-up of $11,250, total $34,750. Combined employer + employee limit: $70,000.
A common match is "100% of your first 3%" or "50% of your first 6%." Both equal 3% of your salary in free money — but only if you contribute at least that much. Always contribute at least enough to capture the full match. It's an instant 50–100% return before any market gains.
The compounding case: $500/month at 7% average annual return grows to ~$1.2M in 40 years. The same amount started 10 years later reaches only ~$566k. Time in the market matters more than contribution amount.
Traditional: pay taxes later (at retirement). Roth: pay taxes now, withdraw tax-free. If you expect to be in a higher bracket in retirement, Roth wins. If you expect lower rates later, traditional wins. Many plans allow splitting contributions between both.
Model my 401(k) →Under the Fair Labor Standards Act, most hourly workers must be paid at least 1.5× their regular rate for every hour worked beyond 40 in a single workweek. "Workweek" is any fixed 7-day period — it doesn't have to be Monday–Sunday.
Some states go further: California requires daily overtime (1.5× over 8 hours/day, double time over 12 hours/day). Alaska and Nevada have similar daily rules. Your employer must apply whichever rule — state or federal — is more generous to you.
Exempt employees don't receive overtime regardless of hours worked. To be exempt you must meet all three tests: salary basis (fixed salary, not hourly), salary level (at least $684/week), and duties test (executive, administrative, or professional role). Misclassification is common and illegal — if you're performing non-exempt duties, overtime is owed regardless of job title.
Overtime & taxes: OT is taxed at your marginal rate, not a special rate. Employers sometimes withhold more on OT weeks because the IRS withholding tables annualize each paycheck — but your actual annual tax bill is the same. You'll square up in April.
Your "regular rate" for overtime includes most forms of compensation: hourly wages, shift differentials, non-discretionary bonuses, and commissions. Discretionary bonuses and reimbursements are excluded. If your employer pays a production bonus, it affects your OT rate — and many employers calculate this incorrectly.
Calculate my overtime →Employers use one of two methods to withhold tax from bonuses. The flat rate method (also called the percentage method) withholds a flat 22% federal tax on supplemental wages up to $1 million — regardless of your actual tax bracket. The aggregate method adds your bonus to your regular salary, calculates withholding on the total, then subtracts what was already withheld — often resulting in more tax held back.
If your bonus is withheld at 22% but you're in the 12% bracket, you'll get a refund when you file. If you're in the 32% bracket, you'll owe more. The withholding method affects your cash flow during the year, but your true tax bill is calculated at filing based on total annual income.
Over $1 million? Supplemental wages above $1 million in a year are withheld at 37% (the top marginal rate), regardless of your actual bracket.
You can't change how your employer withholds, but you can adjust your regular W-4 withholding to compensate — increasing it before a bonus or decreasing it afterward. Some employees also time large 401(k) contributions in the same pay period as a bonus to reduce the taxable amount.
Most states tax bonuses the same as regular wages. A few states have special supplemental withholding rates. In all cases, you'll pay state tax on your bonus at your state's applicable rate — there's no federal-style "flat" option at the state level in most states.
Calculate my bonus tax →The quick conversion: hourly rate × 2,080 = annual salary (based on 40 hours/week × 52 weeks). A $25/hr job equals $52,000/year. A $50/hr rate equals $104,000. This formula assumes no overtime and full-year employment.
For the reverse: annual salary ÷ 2,080 = hourly equivalent. An $80,000 salary is ~$38.46/hr.
Salaried roles often include benefits that add 20–40% to total compensation: health insurance, 401(k) match, PTO, sick leave, and sometimes equity. An hourly job at $30/hr with no benefits may be worth less than a salaried role at $55,000 with full benefits. Always compare total compensation packages, not just the base number.
PTO matters: A salaried job with 15 days of PTO effectively means you're paid for 5 extra weeks you don't work. That's like getting a ~9.6% raise on an hourly equivalent.
The most honest comparison is after-tax, after-deduction take-home pay. An hourly contractor paying their own self-employment tax (15.3%) and benefits is in a very different position than a W-2 employee at the same gross rate. Use our calculators to compare actual net income side-by-side.
Convert my hourly rate →When you work as an employee, your employer covers half of your FICA taxes (6.2% Social Security + 1.45% Medicare = 7.65%). As a self-employed person or 1099 contractor, you pay both halves: 15.3% on net self-employment income up to $176,100, then 2.9% above that. This is the self-employment (SE) tax, and it's separate from income tax.
You can deduct half of your SE tax from your gross income when calculating income tax. If you owe $10,000 in SE tax, you deduct $5,000 from your taxable income before applying income tax brackets. This partially offsets the double-FICA burden and brings your effective rate closer to an employee's.
QBI deduction: Self-employed individuals may also qualify for the 20% Qualified Business Income (QBI) deduction under Section 199A, potentially reducing taxable income by up to 20% of net self-employment income. Income limits apply.
Unlike employees, self-employed workers don't have taxes withheld automatically. You must pay estimated taxes quarterly (April, June, September, January). Underpaying by more than $1,000 triggers a penalty. A common rule: set aside 25–30% of every payment you receive to cover both SE and income tax.
Self-employed workers can deduct legitimate business expenses that reduce taxable profit before SE tax is calculated: home office, equipment, software, health insurance premiums, retirement contributions (SEP-IRA up to $69,000 in 2026), and professional development.
Calculate my SE tax →If you sell an asset you've held for one year or less, the gain is "short-term" and taxed as ordinary income — your same marginal rate (10%–37%). Hold it for more than one year and it's "long-term," taxed at preferential rates: 0%, 15%, or 20% depending on your income.
For 2026, single filers pay 0% on long-term gains up to $48,350, then 15% up to $533,400, then 20% above that. This is one of the most significant tax advantages available to investors.
High earners face an additional 3.8% Net Investment Income Tax (NIIT) on investment income including capital gains. The threshold is $200,000 for single filers and $250,000 for married filing jointly. This means the effective top capital gains rate is 23.8% (20% + 3.8%) for very high earners.
Tax-loss harvesting: Capital losses offset capital gains dollar-for-dollar. If you have $10,000 in gains and $6,000 in losses, you only pay tax on $4,000. Losses in excess of gains can offset up to $3,000 of ordinary income per year, with the remainder carried forward.
Stocks, bonds, real estate, cryptocurrency, collectibles, and business interests all generate capital gains when sold at a profit. Cryptocurrency is treated as property by the IRS — every trade, sale, or spend is a taxable event. Keep records of cost basis for all assets.
Hold assets for more than a year to qualify for long-term rates. Use tax-advantaged accounts (401k, IRA, HSA) for high-turnover investments. Consider Opportunity Zone investments for gains deferral. For real estate, the Section 121 exclusion allows $250,000 ($500,000 for couples) of gain on a primary residence to be excluded from tax.
Calculate my capital gains tax →