How Much Tax Is Deducted From a Paycheck in Tennessee?
Discover how various federal and other deductions impact your Tennessee paycheck, clarifying what's withheld before you get paid.
When you earn a salary or wages, the amount you receive in your bank account is often less than your total earnings. This difference arises because various amounts are subtracted from your gross pay, which is your total earnings before any deductions. These subtractions are known as paycheck deductions and cover a range of obligations and contributions. The resulting amount, your net pay or take-home pay, is what you actually receive. Understanding these deductions helps you comprehend how your gross earnings are transformed into your usable income.
Federal Income Tax Withholding
Federal income tax withholding is a significant deduction from most paychecks, representing an estimation of an individual’s annual income tax liability. Employers use information from the Internal Revenue Service (IRS) Form W-4, the Employee’s Withholding Certificate, to calculate the correct amount to withhold. This form allows employees to indicate their tax filing status, such as single or married filing jointly. It also accounts for factors like dependents and any additional income or deductions they anticipate.
The Form W-4 does not use “allowances” as it did in the past; instead, it directly incorporates information to help employers determine accurate withholding. This ensures employees pay enough income tax throughout the year to cover their expected tax bill, thereby avoiding a large tax payment or a significant refund. Federal income tax operates under a progressive system, meaning higher earners are subject to higher tax rates, which vary based on income levels and filing status.
Social Security and Medicare Taxes
Social Security and Medicare taxes, often called FICA taxes, are mandatory federal payroll taxes. These taxes fund programs providing retirement, disability, and hospital insurance benefits. For 2025, the employee contribution rate for Social Security is 6.2% of wages, and the Medicare tax rate is 1.45%.
A wage base limit applies to Social Security taxes; for 2025, wages above $176,100 are not taxed. In contrast, there is no wage base limit for Medicare tax; all covered wages are subject to the 1.45% Medicare tax. An additional 0.9% Medicare Tax applies to wages exceeding certain thresholds, such as $200,000 for single filers, with no employer match.
Tennessee’s Paycheck Tax Landscape
Tennessee has a distinct approach to state-level taxation. Notably, Tennessee does not impose a state income tax on wages or salaries. This means Tennessee residents do not see a deduction for state income tax from their earnings.
The absence of a state income tax on wages means Tennessee relies more heavily on consumption-based taxes, such as sales tax, to fund state operations. While unemployment insurance is a state program, employers pay its premiums and cannot deduct them from employee wages. There are no other state-mandated employee payroll deductions, like state disability insurance, in Tennessee.
Other Common Paycheck Deductions
Beyond federal taxes, other deductions can reduce an employee’s net pay, though these are not considered taxes. Many are voluntary and require employee consent. Pre-tax deductions are subtracted from gross pay before income taxes are calculated, which can lower an individual’s taxable income. Common examples include health insurance premiums, 401(k) retirement plans, Flexible Spending Accounts (FSAs), and Health Savings Accounts (HSAs).
Other deductions occur after taxes are calculated and withheld; these are known as post-tax deductions. Examples include Roth 401(k) contributions, which are taxed upfront but offer tax-free withdrawals in retirement. Union dues, charitable contributions, and wage garnishments, such as court-ordered child support or outstanding debts, are also common post-tax deductions.