From gross salary to net pay
A paycheck is built in a fixed order. Start with gross pay for the period, which is the annual salary divided by the number of pay periods: 26 for biweekly, 24 for semimonthly, 52 for weekly and 12 for monthly. Biweekly and semimonthly are not the same thing, and the difference matters, because two months a year deliver a third biweekly check. Next come pre-tax deductions. A traditional 401(k) deferral reduces income subject to federal income tax but not Social Security or Medicare. A health insurance premium taken through a Section 125 cafeteria plan reduces both, which makes each dollar of premium slightly more valuable than a dollar of 401(k) deferral.
Federal income tax withholding is then computed on the annualized figure: gross salary minus 401(k) and health premiums minus the standard deduction for your filing status, run through the 2025 brackets, and divided back down to the pay period. FICA is taken separately on the FICA wage base, and a flat state rate is applied last. Everything left is net pay.
Worked example
Consider $75,000 a year paid biweekly, filing single, deferring 5% to a traditional 401(k) and paying $150 per paycheck for health insurance. The 401(k) takes $3,750 a year and the premiums take $3,900. FICA is charged on $71,100, giving $4,408.20 of Social Security and $1,030.95 of Medicare, a total of $5,439.15. Federal taxable income is $75,000 minus $3,750 minus $3,900 minus the $15,000 standard deduction, or $52,350. The tax is 10% of the first $11,925 plus 12% of the next $36,550 plus 22% of the remaining $3,875, which comes to $6,431.00.
Net pay for the year is $55,479.85, or $2,133.84 per biweekly paycheck against a gross of $2,884.62. Roughly 74% of gross pay reaches the bank account, and another 5% is sitting in the 401(k) rather than being lost.
Where the estimate can drift
Actual withholding follows the Form W-4 on file, which can claim dependents, other income, deductions beyond the standard amount, or a flat extra dollar amount per paycheck. Employers also use the IRS percentage method tables, which round slightly differently from annualized bracket math. Bonuses are usually withheld at the 22% supplemental rate instead. Nine states levy no income tax on wages, while others use graduated brackets, local city taxes or payroll levies such as state disability insurance, so treat the flat state percentage as an approximation of your effective rate rather than a bracket.