Federal income tax uses a progressive tax system with seven brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%). Your employer annualizes your paycheck, subtracts your standard deduction (based on W-4 filing status), and applies the brackets to determine withholding. The tax is then divided back to match your pay period. Pre-tax deductions like 401(k) contributions and health insurance reduce your taxable income, lowering your federal tax liability.

FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare. Social Security tax is 6.2% on wages up to the annual wage base ($168,600 in 2024). Medicare tax is 1.45% on all wages with no cap. High earners pay an Additional Medicare Tax of 0.9% on wages exceeding $200,000 (Single/HOH), $250,000 (MFJ), or $125,000 (MFS). Certain pre-tax deductions (like health insurance under Section 125) reduce FICA wages, but 401(k) contributions do not reduce FICA wages.

As of 2024, nine states impose no state income tax on earned wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire does tax dividend and interest income but not wages. If you live in one of these states, your paycheck will not have state income tax withheld, though you'll still pay federal taxes and FICA.

Pre-tax deductions reduce your taxable income, which lowers both your federal and state income tax. Common pre-tax deductions include 401(k)/403(b) contributions, health/dental/vision insurance premiums, HSA contributions, and FSA contributions. Importantly, 401(k) contributions reduce income tax but are still subject to FICA (SS/Medicare) taxes. However, Section 125 cafeteria plan deductions (health insurance, HSA, FSA) reduce both income tax and FICA wages, providing additional savings.

2024 Federal Tax Brackets for Single filers:

Rate	Taxable Income Range
10%	$0 – $11,600
12%	$11,601 – $47,150
22%	$47,151 – $100,525
24%	$100,526 – $191,950
32%	$191,951 – $243,725
35%	$243,726 – $609,350
37%	$609,351+

Brackets for Married Filing Jointly are roughly double the Single brackets at lower levels. Standard deductions: Single $14,600 | MFJ $29,200 | HOH $21,900.

Your employer annualizes each paycheck to determine withholding. For example, a bi-weekly gross of $5,000 is treated as $130,000 annually ($5,000 × 26). The tax is calculated on the annual amount and then divided back per period. This means changing pay frequency (e.g., from bi-weekly to semi-monthly) with the same per-period gross will change your annualized income and may shift you into different tax brackets. Always review your W-4 when changing jobs with different pay frequencies.

The Additional Medicare Tax is an extra 0.9% tax on wages exceeding certain thresholds, introduced under the Affordable Care Act. For 2024, the thresholds are: $200,000 for Single and Head of Household filers, $250,000 for Married Filing Jointly, and $125,000 for Married Filing Separately. Employers are required to withhold this additional tax once your wages exceed $200,000 in a calendar year, regardless of your filing status.