How US Income Tax Works
A clear guide to how federal income tax is calculated. If you have ever wondered where your paycheck goes, this explains it.
The Standard Deduction
Before calculating tax, you subtract the standard deduction from your gross income. For 2025, this is $15,000 for single filers and $30,000 for married filing jointly. Most taxpayers take the standard deduction rather than itemizing. Only income above the deduction is taxable.
Federal Tax Brackets (2025, Single Filer)
| Bracket | Income Range | Rate |
|---|---|---|
| 1 | $0 – $11,925 | 10% |
| 2 | $11,925 – $48,475 | 12% |
| 3 | $48,475 – $103,350 | 22% |
| 4 | $103,350 – $197,300 | 24% |
| 5 | $197,300 – $250,525 | 32% |
| 6 | $250,525 – $626,350 | 35% |
| 7 | Over $626,350 | 37% |
These are progressive — each portion of income is taxed at its bracket rate. Someone earning $60,000 does NOT pay 22% on all of it. The first $11,925 is at 10%, the next chunk at 12%, and only the portion above $48,475 at 22%.
FICA: Social Security and Medicare
On top of income tax, every worker pays FICA taxes: 6.2% for Social Security (on earnings up to $176,100) and 1.45% for Medicare (no cap). Your employer pays a matching amount. Together, FICA adds 7.65% to your tax burden. High earners above $200,000 pay an additional 0.9% Medicare surtax.
A Worked Example: $65,000 Salary
- Standard deduction: $15,000
- Taxable income: $50,000
- Federal tax: 10% on $11,925 + 12% on $36,550 + 22% on $1,525 = $5,914
- Social Security: 6.2% × $65,000 = $4,030
- Medicare: 1.45% × $65,000 = $943
- Total deductions: $10,887
- Take-home: $54,113 ($4,509/month)
Use our salary calculator to see the exact breakdown for any amount.
State Income Tax
In addition to federal tax, most states impose their own income tax with rates ranging from under 3% to over 13% (California). Nine states have no income tax at all. State tax is not included in the federal calculations above.
Key Deadlines
- April 15: Federal tax return due (Form 1040)
- October 15: Extended filing deadline
- Quarterly estimates: April 15, June 15, September 15, January 15 (for self-employed and those without adequate withholding)
Frequently Asked Questions
Do I pay tax on all my income?
No. The standard deduction ($15,000 for single filers in 2025) is subtracted first. Only income above that is taxed.
What does "marginal tax rate" mean?
Your marginal rate is the rate on your last dollar of income. If you are in the 22% bracket, only the income within that bracket is taxed at 22% — not your entire income.
Is Social Security tax the same as income tax?
No. They are separate. Social Security (6.2%) and Medicare (1.45%) are FICA taxes taken from every paycheck on top of income tax.
Do all states have income tax?
No. Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire (dividends only), South Dakota, Tennessee, Texas, Washington, and Wyoming.
Important Disclaimer
The figures provided by this calculator are estimates based on the information you enter and published rates at the time of writing. They do not constitute financial, tax, or legal advice, and we accept no liability for decisions made on the basis of these estimates. Your actual liability may differ depending on your individual circumstances, applicable reliefs, and any changes to rates or legislation. Always consult a qualified professional or check the latest IRS guidance at irs.gov before making financial decisions.