Guide - Tax - US
US Paycheck Withholding: W-4, Federal Tax, FICA, and State Estimates
Your paycheck is shaped by several systems at once: federal withholding, payroll taxes, benefits, retirement contributions, and state or local rules.
What comes out of a paycheck
Federal income tax withholding is only one line. Social Security and Medicare are payroll taxes. Traditional 401(k) contributions reduce federal taxable wages but still count for FICA. Health insurance, HSA, and FSA deductions often reduce both federal taxable wages and FICA wages.
| Line | Usually pre-tax? | Notes |
|---|---|---|
| Federal income tax | No | Withheld using W-4 settings |
| Social Security | No | 6.2% up to the annual wage base |
| Medicare | No | 1.45% plus additional Medicare for high earners |
| Traditional 401(k) | Federal only | Usually does not reduce FICA wages |
| Health insurance / HSA | Often | Plan rules matter |
How W-4 Steps 3 and 4 change withholding
Step 3 reduces annual federal withholding for credits, such as dependent credits. Step 4(a) adds other income into the estimate. Step 4(b) adds extra deductions. Step 4(c) withholds an extra amount from every paycheck.
Frequently asked questions
What does Form W-4 control?
Form W-4 tells your employer how much federal income tax to withhold from wages. It does not directly set Social Security, Medicare, or every state withholding rule.
Why is my paycheck different from my salary divided by pay periods?
Payroll subtracts federal income tax, FICA, state or local tax, retirement contributions, insurance, HSA or FSA deductions, and any post-tax deductions.
Should I aim for a big refund?
A big refund usually means too much was withheld during the year. Some people like the forced saving, but it also means smaller paychecks through the year.