How payroll tax withholding works in 2026
Every US employer is required to withhold federal income tax, Social Security tax, and Medicare tax from employee paychecks, then remit these to the IRS on a regular schedule. State income tax withholding applies in 43 states plus Washington D.C.
Federal income tax is calculated using the percentage method from IRS Publication 15-T. The amount withheld depends on the employee's gross pay, pay frequency, and W-4 filing status. The 2026 brackets are: 10% on income up to $11,925, 12% up to $48,475, 22% up to $103,350, and progressively to 37% on income above $626,350 (single filer).
FICA taxes (Social Security + Medicare) are split equally between employer and employee. Employees pay 6.2% Social Security on wages up to the SSA wage base ($176,100 for 2025; 2026 base TBA) and 1.45% Medicare on all wages — plus an additional 0.9% Medicare surtax on wages above $200,000 for single filers. For a complete paycheck breakdown that combines all taxes alongside pre-tax deductions like 401(k) contributions and health insurance premiums, use our free payroll calculator.
State income tax varies by state from 0% (nine states with no income tax: AK, FL, NV, NH, SD, TN, TX, WA, WY) to 13.3% in California at the top bracket. The employer matches FICA dollar-for-dollar on top of gross wages — for the full employer-side cost including FUTA, SUTA, and workers compensation insurance, see the employer payroll tax calculator.
Working overtime? Overtime earnings are taxed at the same marginal rates as regular wages — they don't get a special rate. But as overtime pushes your annualized income into higher brackets, more of your total pay gets taxed at higher rates. Use the overtime pay calculator for the gross figure, then run it through this tool to see the full withholding impact. If you're deciding between a 1099 contract role and a W-2 position, the 1099 vs W-2 calculator shows the self-employment tax tradeoff.