Where your paycheck actually goes

Almost everyone who has taken a first salaried job has had the same small shock: the number in the offer letter, divided by twelve, is not the number that arrives. The gap is usually between a fifth and a third, and it is made of four separate things that behave differently.

Federal income tax is not one rate

The most common misunderstanding in personal tax is that a raise into “the 24% bracket” taxes all your income at 24%. It does not. Brackets are marginal: each slice of income is taxed at its own rate, and only the slice above the threshold pays the higher one.

Earning one dollar more can never leave you with less money after federal income tax. That dollar is taxed at the higher rate; every dollar beneath it is not.

Before any of that, the standard deduction comes off the top, so the first several thousand dollars are taxed at nothing at all. This is why your effective rate — total tax divided by total income — is always well below your top bracket. Our take-home calculator shows both, because comparing the wrong two numbers is how people conclude the maths is broken.

FICA is flat, and it does not care about your deductions

Social Security and Medicare are withheld separately: 6.2% and 1.45% of wages, matched by your employer. Two things about them catch people out.

• Social Security stops. It only applies up to an annual wage base, which rises each year. Above it, that 6.2% simply ends — which is why a high earner’s take-home percentage improves late in the year.
• 401(k) contributions do not reduce it. Pre-tax retirement contributions lower your income tax, but FICA is calculated on gross pay. Getting this wrong overstates take-home for most people, so we compute FICA on gross rather than on the reduced figure.

State tax is the line we cannot compute

This is the honest limit of every calculator that does not ask where you live, and of ours even though it does not. Some states take nothing. Others take a flat percentage. Others run their own progressive brackets with their own deductions, and some cities levy on top of that.

We show federal income tax and FICA only, and we say so next to the answer rather than in a footnote. If you live somewhere with meaningful state income tax, your real take-home is lower than our figure — often by several percent.

And then the deductions nobody models

Health, dental and vision premiums. Your share of a retirement plan. A health savings account. Life insurance. Commuter benefits. Union dues. Any of these can be larger than the tax difference you were worrying about, and none of them appear in a generic calculator because they are specific to your employer’s plan.

The one document that has all of it is your own pay stub. A calculator is for the question “what would this offer be worth?” before you have one.