The amount withheld from your paycheck depends on your income, filing status, number of dependents, and state of residence
Your employer calculates tax withholding using a W-4 form you fill out when you start a job. The withholding is not a fixed percentage — it changes based on information you provide: whether you file as single, married, or head of household; how many dependents you claim; and whether you have other income or side work. Federal income tax withholding is separate from Social Security tax (6.2% of gross pay) and Medicare tax (1.45% of gross pay), which are fixed rates.
The federal withholding tables the IRS publishes each year determine how much comes out. Your employer uses your W-4 answers to look up the amount in those tables. If you live in a state with income tax, your state also withholds a percentage — the rate varies by state and sometimes by county. Some states withhold nothing.
The goal of withholding is to have enough tax removed throughout the year so you do not owe a large amount when you file your return in April. If too much is withheld, you get a refund. If too little is withheld, you owe money.
Key Takeaways
- Federal income tax withholding is calculated from your W-4 form and varies based on your income, filing status, and dependents — it is not a flat percentage.
- Social Security tax is always 6.2% of your gross pay and Medicare tax is always 1.45%, regardless of your W-4 answers.
- State income tax withholding ranges from 0% to over 10% depending on which state you live in and what your income is.
- The amount withheld is meant to match your tax bill for the year, but you can adjust your W-4 if too much or too little is being taken out.
How federal income tax withholding is calculated
When you start a job, you complete a Form W-4 (Employee's Withholding Certificate). On this form you enter your filing status, number of dependents, and any other income you earn. Your employer sends this information to payroll software or a payroll processor, which looks up the withholding amount in IRS tables published each year.
The IRS tables show how much to withhold based on your pay frequency (weekly, biweekly, monthly), your filing status, and the total of your wages and dependents. For example, a single person with no dependents earning $1,500 biweekly will have a different withholding amount than a married person with two dependents earning the same amount. The tables account for the standard deduction and tax brackets for that year.
You can change your W-4 at any time during the year if your situation changes — if you get married, have a child, take a second job, or realize too much or too little is being withheld. Submit a new W-4 to your payroll department and the new withholding takes effect on your next paycheck.
Social Security and Medicare taxes are always the same percentage
Social Security tax is 6.2% of your gross pay, up to a wage limit that changes each year. In 2024, you pay Social Security tax on the first $168,600 of income; earnings above that are not subject to Social Security tax. Your employer also pays 6.2%, for a total of 12.4%.
Medicare tax is 1.45% of all your gross pay with no wage limit. Your employer pays another 1.45%. If your income is above a certain threshold (which depends on your filing status), you also pay an additional 0.9% Medicare tax on the excess — this is called the Net Investment Income Tax in some cases, though the 0.9% applies to wages.
These two taxes are withheld automatically and do not change based on your W-4. They appear on your pay stub as "FICA" (Federal Insurance Contributions Act) or listed separately as "Social Security" and "Medicare".
State income tax withholding varies widely
Nine states have no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not wages). If you live in one of these states, no state income tax is withheld from your paycheck.
In the other 41 states, withholding rates range from about 1% to over 10%, depending on your income level and state tax brackets. Some states use a flat tax rate — Colorado and Illinois, for example, withhold a single percentage from all residents regardless of income. Most states use progressive brackets, meaning higher earners pay a higher percentage.
A few states also have local income taxes in addition to state tax. New York City, for example, withholds both New York State income tax and New York City income tax. When you start a job in a state with income tax, you fill out a state W-4 form (the name and format vary by state) to tell your employer how much to withhold.
Why withholding does not always match what you owe
Withholding is an estimate based on the information on your W-4. It assumes you will earn the same amount every pay period for the whole year, that you have no other income, and that your life circumstances do not change. In reality, your situation often differs.
If you get a raise mid-year, your withholding does not automatically increase — you have to update your W-4. If you work only part of the year, withholding may be too high because it assumes a full year of income. If you have investment income, rental income, or a side business, that income is not withheld from your paycheck, so your total tax bill may be higher than what was withheld from your W-4 job.
The opposite can happen too: if you have significant deductions, credits, or dependents, withholding may be too high and you will receive a refund when you file your tax return.
How to adjust your withholding
If you notice too much or too little tax is being withheld, you can file a new W-4 with your employer. The IRS provides a withholding calculator on its website (irs.gov) that walks you through questions about your income, filing status, dependents, and other income to estimate the correct withholding.
If you are withholding too much and want a larger paycheck, you can claim more allowances or dependents on your W-4 (though the 2020 W-4 form changed how this works — it now uses a credits system rather than allowances). If you are withholding too little and want to avoid owing money at tax time, you can claim fewer dependents or ask your employer to withhold an extra dollar amount from each paycheck.
Changes take effect on your next paycheck after you submit the new W-4. Keep a copy for your records.
Self-employment and contractor withholding
If you are self-employed or work as an independent contractor, no tax is withheld from your income. You are responsible for paying estimated quarterly taxes to the IRS and your state (if applicable) four times per year. These payments cover both income tax and self-employment tax (Social Security and Medicare for self-employed people, which is 15.3% total).
Estimated tax payments are due on April 15, June 15, September 15, and January 15 of the following year. You calculate them using IRS Form 1040-ES and pay through the IRS website, by mail, or through your tax software. If you do not pay enough in estimated taxes, you may owe penalties and interest when you file your return.
Frequently Asked Questions
Why do I owe money at tax time if taxes are already being withheld?
Withholding is based on your W-4 and assumes a steady income all year. If you earned more than expected, had a second job, received a bonus, or have income not subject to withholding (like self-employment or investment income), your total tax bill may exceed what was withheld. You can adjust your W-4 mid-year or make estimated tax payments if you have non-wage income.
Can I claim zero dependents to have more tax withheld?
On the current W-4 form, you do not claim dependents to increase withholding — instead, you can enter an extra dollar amount you want withheld from each paycheck in the "Other income adjustments" section. This is a more direct way to may support enough tax is removed if you expect to owe money.
What happens if I do not fill out a W-4?
If you do not submit a W-4, your employer must withhold as if you are single with no dependents, which is the highest withholding rate. This means more tax comes out of your paycheck than may be necessary. You should complete and submit a W-4 as soon as possible.
Does my employer withhold taxes for state income tax if I work remotely in a different state?
Your employer generally withholds based on the state where you work, not where you live. If you work remotely for a company in another state, you may need to file a nonresident return in that state and a resident return in your home state. Contact your state tax authority or payroll department to confirm the correct withholding.
Is the money withheld for taxes held in an account for me?
No. The money withheld goes directly to the IRS and your state tax agency. It is not held in a separate account in your name. When you file your tax return, the IRS compares what was withheld to what you actually owe, and either sends you a refund or bills you for the difference.