US money guide
Why your paycheck is smaller than you expected
You signed for $145,000. Divided by 26 pay periods that's $5,577. What lands is closer to $3,900. Nothing has gone wrong — but the gap is bigger than most people expect, and it's worth knowing exactly where it went.
The four things taking a cut
1. Federal income tax
Progressive, from 10% up to 37% in 2026 — but only on income above the standard deduction ($16,100 single, $32,200 married filing jointly). Your "bracket" applies only to the dollars inside it, never to your whole salary.
2. FICA — the one nobody explains
Social Security takes 6.2% of wages up to $184,500, and Medicare takes 1.45% with no cap. High earners pay an extra 0.9% Medicare surcharge above $200,000 (single). Your employer pays the same again on your behalf — which is part of why hiring you costs more than your salary.
3. State (and sometimes city) income tax
Anywhere from 0% in Texas or Florida to over 13% at the top in California. Some cities pile on their own — New York City residents pay a municipal income tax on top of New York State.
4. Pre-tax deductions
Health insurance premiums, HSA or FSA contributions and traditional 401(k) deferrals come out before tax. They shrink your paycheck but also shrink your taxable income — so they don't cost you dollar for dollar.
Check your withholding is actually right
Withholding is an estimate your employer makes from your W-4 — not a precise calculation. Two situations throw it off badly: a working spouse (each job withholds as if it's your only income) and large RSU vests or bonuses (usually withheld at a flat 22%, which is too little if you're in a higher bracket).
Both produce the same outcome — an unwelcome bill in April. The IRS Tax Withholding Estimator takes ten minutes and is worth doing once a year, especially after a raise, a marriage, or a new equity grant.
The number that actually matters
Not your bracket, and not your salary — your effective rate: total tax divided by total income. It's almost always far lower than your bracket, and it's the honest measure of what you keep.
Quick answers
Why is my paycheck less than my salary divided by 26?
Federal income tax, Social Security (6.2%), Medicare (1.45%), any state and local income tax, plus deductions like health insurance and 401(k) all come out before you see it.
What is FICA on my paystub?
FICA is Social Security and Medicare combined — 7.65% of your wages, matched by your employer. Social Security stops at the annual wage base; Medicare has no cap.
Why did my paycheck get bigger later in the year?
You likely hit the Social Security wage base ($184,500 in 2026), so that 6.2% stopped being withheld for the rest of the year.
Written in plain English by mytakehome.money. General information, not financial advice — check anything important at gov.uk or with a qualified adviser.