Understanding the taxes withheld from your paycheck

Last updated: August 21, 2026

Applies to: US W-2 employees. If you're an independent contractor (1099), taxes are not withheld from your pay — see How do I fill out my US contractor tax form (W-9)? Canadian T4 employees see a different set of deductions on their pay stub.

Summary: If you are a W-2 employee, several taxes come out of each paycheck before you get your net (take-home) pay — federal income tax, Social Security and Medicare (together called FICA), and, in most places, state (and sometimes local) income tax. This article explains what each one is so your pay stub makes more sense.

When you look at your pay stub, the amount deposited to your bank is usually smaller than your gross pay. The difference is made up of taxes and any other deductions. Here is a plain-language guide to the tax lines you are most likely to see.

Note: This applies to W-2 employees. If you are an independent contractor (1099), taxes are generally not withheld from your pay and you are responsible for your own tax payments. Not sure which one you are? See "Am I a W-2 employee or an Independent Contractor (1099)?"

Federal income tax

This is the tax the federal government collects on your earnings. How much is withheld each paycheck depends mostly on the information you provided on your Form W-4 — your filing status, dependents, and any extra withholding you asked for.

Your W-4 does not set your final tax bill. It is an estimate that spreads your expected tax across the year. When you file your annual return, the IRS reconciles what was withheld against what you actually owe, which is why some people get a refund and others owe a balance.

Social Security and Medicare (FICA)

FICA stands for the Federal Insurance Contributions Act. It funds two federal programs and usually appears as two separate lines on your pay stub:

  • Social Security — funds retirement, disability, and survivor benefits. It applies up to an annual wage limit that the government sets each year.

  • Medicare — funds health coverage for people 65 and older and certain others. There is no wage limit for Medicare.

These are set by federal law, so they are not something you elect on your W-4. As a W-2 employee, your share is withheld from your pay, and your employer of record pays a matching employer share on top of that (you do not see the employer share on your stub).

State and local income tax

Most states also collect income tax, which is withheld based on the state withholding form you completed during onboarding.

  • A handful of states have no state income tax at all. If you live and work in one of those states, you may not see a state income-tax line and you may not have been asked to complete a state withholding form.

  • Some cities or localities also collect their own income tax, which would appear as a separate line.

Because state rules vary widely, the exact lines on your stub depend on the state (or states) tied to your work and home address. If you live and work in different states, see "Working or living in more than one state: how state taxes work."

What is not an income tax

Not every deduction on your stub is a tax. You may also see items such as health insurance premiums, retirement contributions, or court-ordered deductions like child support. Those are separate from the taxes above.

Where to see your withholding

You can view the taxes withheld on each pay stub. See "Where to find and view your paychecks and pay stubs." Your year-end totals appear on your W-2; see "How do I view my tax documents (W-2s, 1099s, 1095-Cs)?"

If something looks wrong

If you think your withholding is set up incorrectly, you can update your W-4 — see "How do I fill out my US tax forms (W-4)?" If you still believe there is a mistake, contact us at support@ascen.com.

This is general information, not individual tax advice. Ascen cannot give personalized tax advice. For questions about your specific situation, please consult a qualified tax professional or your state tax agency.