How we calculate paycheck taxes

Section 5 of the pay stub builder, Taxes & Deductions, has two modes: Auto Calculate and Manual. Auto Calculate reads the pay, pay frequency, filing status, state, addresses and pay date you entered. It then fills federal income tax, Social Security, Medicare and state income tax, plus local tax and state program lines where it holds the rate. It recalculates each time you change one of those entries.

The pay date picks the tax year. The engine holds 2024 and 2025 and 2026 tables; a later pay date uses the newest ones. Each line is rounded to the cent.

Inputs

Taxable pay for the period, the pay frequency and the filing status: Single or Married (filing jointly).

Method

The annualized percentage method. The period’s taxable pay is multiplied by the pay periods in a year. The standard deduction comes off: $16,100 for Single, $32,200 for Married. The 2026 brackets apply to the rest, and the yearly tax is divided back by the pay periods.

Source

IRS Publication 15-T (2026), Federal Income Tax Withholding Methods. For an employee whose Form W-4 has only a filing status, this gives the same result as the publication’s percentage method worksheet, before rounding.

Limits

Only the filing status (Single, Married or Head of household) and the Step 4(c) extra withholding are read from IRS, About Form W-4, Employee's Withholding Certificate. The multiple jobs box, dependents, other income and deductions are treated as blank. A bonus is taxed with the rest of the period’s pay, not at a separate flat rate.

Taxable pay is gross pay less pre-tax deductions: 401(k) or 403(b) contributions and Section 125 health, dental, vision, HSA and FSA amounts.

Ranges are yearly pay after the standard deduction. Checks in a year: weekly 52, every 2 weeks 26, twice a month 24, monthly 12.

Inputs

Gross pay for the period, pre-tax benefit deductions and the year-to-date gross pay you typed.

Method

6.2% of Social Security wages, until wages for the year reach $184,500. After that the line is zero. Social Security wages are gross pay less Section 125 benefits. A traditional 401(k) contribution does not lower them.

Source

Social Security Administration, Contribution and Benefit Base for the 2026 wage base; IRS Topic no. 751, Social Security and Medicare withholding rates for the rate.

Limits

The wage base is counted from YTD Gross. If that field is blank, earlier wages count as zero and the full rate applies.

Inputs

The same wages as Social Security and the year-to-date gross pay you typed.

Method

1.45% of all Medicare wages, with no yearly cap. Additional Medicare Tax of 0.9% is added on wages above $200,000 in the year, whatever the filing status, as an employer’s payroll withholds it. Both parts print as one Medicare line.

Source

IRS Topic no. 751, Social Security and Medicare withholding rates and IRS Topic no. 560, Additional Medicare tax.

Limits

The $200,000 is counted from YTD Gross. If that field is blank, earlier wages count as zero and only the 1.45% applies.

Inputs

The employee’s state (the company’s state if the employee’s is blank), taxable pay, pay frequency, filing status and pay date.

Method

Each state’s own 2026 withholding formula. Most work like the federal one: yearly pay, less the state’s deduction or allowance, through the state’s rate or brackets, divided back to one check. Where the state form has allowances, one is assumed. Nine states have no income tax on wages, so the line is zero: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Source

Each state revenue department’s 2026 withholding guide, for example Illinois Department of Revenue, Booklet IL-700-T (2026).

Limits

• One state per stub. Reciprocity and pay split between a home state and a work state are not handled.
• State withholding form entries (allowances, exemptions, extra withholding) are not asked for.
• Married uses the state’s married rule where the engine has a verified one, and the Single rule otherwise.
• Hawaii and Utah: no verified 2026 Married rule, so the Single rule is used.
• District of Columbia: no verified 2026 withholding formula, so the figure is a rougher estimate.

Pennsylvania counts 401(k) and 403(b) contributions as wages, so only Section 125 benefits come off there.

Where a state changed its withholding during 2026, the pay date picks the rule: Georgia (new rule from May 11), Idaho (new rule from July 23), Ohio (new rule from August 1), and Utah (new rule from June 1).

To see one state’s figures, use the paycheck calculator; it runs the same engine.

Inputs

The employee’s home city and the company’s city, plus one detail the builder asks for when it needs it: a Pennsylvania PSD code, a Maryland county, or a tick that an address is inside city limits.

Method

• Pennsylvania. Earned Income Tax at the higher of the home and work rates, and the Local Services Tax spread over the year’s checks, for the 2,619 PSD codes in the state register.
• New York. New York City resident tax by its brackets; the Yonkers resident surcharge and nonresident earnings tax.
• Maryland. The county rate for the county of residence.
• Ohio. City tax for eight cities only: Columbus, Cleveland, Cincinnati, Toledo, Akron, Dayton, Dublin, and Worthington.
• City wage taxes. Detroit, MI, Wilmington, DE, Birmingham, AL, Kansas City, MO, and St. Louis, MO.
• Oregon. The statewide transit tax, 0.1% of wages.

Source

Each city, county or state agency’s own page, for example Pennsylvania DCED, PSD Codes and EIT Rates and Oregon Department of Revenue, Statewide Transit Tax.

Limits

Any other city, county or school district tax is not calculated: Local Tax stays at zero until you type it in Manual. For Wilmington, DE, Birmingham, AL, Kansas City, MO, and St. Louis, MO, the tax is added only after you tick that the address is inside city limits.

State disability, paid leave and unemployment lines

For a 2026 pay date, Auto Calculate also adds the employee-paid state program lines below as deduction rows. Each is the state’s rate times gross pay, with the wage base or cap counted from YTD Gross. Pre-tax deductions are not taken off first.

Not calculated: New Mexico workers' compensation fee (a flat amount each quarter, not a share of wages), Oregon Workers' Benefit Fund assessment (charged per hour worked), and Washington L&I workers' compensation (worker share) (set by the employer's risk class and charged per hour worked).

• Read a Form W-4 beyond the filing status, or a state withholding form.
• Offer Married filing separately.
• Handle more than one job, more than one state, or reciprocity between states.
• Calculate local taxes other than those listed above.
• Tax a bonus or commission at a separate supplemental rate.
• Show the employer’s own payroll taxes. A pay stub shows what is withheld from the employee.
• Calculate anything for a stub in Contractor / 1099 mode, which has no payroll tax lines.

It is an estimate. A pay stub records a payment that was really made, so the tax lines should match what was really withheld. Check every figure, and edit any that differ. This page is not tax advice.

The rates live in data files inside the tax engine, one set per tax year. A scheduled check re-reads the official page behind tracked figures, such as the Social Security wage base, and flags any change. A figure that feeds a pay stub calculation is never changed automatically: a person reads the official publication, updates the table, and the change ships in a release.

The newest data in the engine was loaded on October 9, 2026.

1. Open the pay stub builder and go to section 5, Taxes & Deductions.
2. Choose Manual at the top of the section.
3. Type each tax amount. Auto Calculate no longer overwrites them.

In Pay Information, Tax exempt sets federal and state income tax to zero and keeps Social Security and Medicare. Turning off Apply taxes and deductions removes every tax line.

For any line you do not recognize, see the pay stub glossary.