What Is the Average Percentage Taken Out of a Paycheck?
Understand the common paycheck deductions, including taxes and benefits, and learn what factors influence the percentage taken from your earnings.
Every payday, many workers notice their take-home pay is less than their gross salary. This difference results from various deductions automatically withheld from each paycheck. Understanding these withholdings helps in budgeting and preparing for tax season.
This article outlines the primary types of paycheck deductions, clarifying the typical percentage of earnings allocated to taxes, benefits, and other withholdings.
Federal and State Income Taxes
A significant portion of each paycheck typically goes toward federal income taxes. The U.S. uses a pay-as-you-go system, collecting taxes throughout the year via employer withholding. Your employer estimates your federal income tax based on information you provide and sends it to the Internal Revenue Service (IRS).
The amount withheld is determined by your Form W-4, Employee’s Withholding Certificate, which you complete when starting a job or when your financial situation changes.1Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate This form details your filing status, dependents, and other income or deductions, allowing your employer to calculate the appropriate withholding according to IRS guidelines. Keeping your W-4 updated helps ensure your withholding aligns with your actual tax liability. The IRS also offers an online Tax Withholding Estimator tool for assistance.
Most states also impose an income tax, collected similarly through payroll deductions. While nine states currently lack a broad personal income tax, the others use systems often mirroring the federal approach, sometimes requiring a separate state withholding form. State calculation methods vary but generally consider income, filing status, and allowances.
Both federal and most state income tax systems are progressive, meaning higher income levels face higher tax rates. The federal system, for instance, has tax brackets with rates from 10% to 37% for 2024. These rates apply only to income within each specific bracket. Consequently, the overall percentage withheld for income taxes varies based on earnings and W-4 details.
Social Security and Medicare
Paychecks are also subject to mandatory contributions under the Federal Insurance Contributions Act (FICA), funding Social Security and Medicare.2Social Security Administration. What Are FICA and SECA Taxes? Social Security provides retirement, disability, and survivor benefits, while Medicare funds hospital insurance (Part A) for seniors and certain individuals with disabilities.
For 2024, employees contribute 6.2% of their gross wages to Social Security, but only up to an annual earnings limit of $168,600.3U.S. Postal Service. 2024 Social Security and Medicare Tax Withholding Rates and Limits Once earnings exceed this threshold, Social Security tax withholding stops for the year.
The Medicare tax, however, applies to all covered earnings without a wage limit. The employee rate for 2024 is 1.45%.4Internal Revenue Service. Topic No. 751 Social Security and Medicare Withholding Rates Thus, the combined FICA tax rate for most employees is 7.65% (6.2% Social Security + 1.45% Medicare) on earnings up to the $168,600 limit, and 1.45% on earnings above it. Employers match these contributions.
Higher earners face an Additional Medicare Tax of 0.9% on wages exceeding certain thresholds based on filing status ($200,000 for Single filers, $250,000 for Married Filing Jointly, $125,000 for Married Filing Separately in 2024). Employers begin withholding this extra tax once wages surpass $200,000, regardless of filing status, bringing the total Medicare rate to 2.35% on those higher earnings. There is no employer match for this additional tax.
Voluntary Deductions
Employees may also choose to have additional amounts deducted from their paychecks for various benefits or savings plans. These voluntary deductions require employee authorization.
Common examples include contributions for:
- Health, dental, or vision insurance
- Retirement savings plans (like 401(k)s)
- Life or disability insurance
- Union dues
- Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs)
- Charitable contributions
The availability of these options depends on the employer’s benefits package. Federal law generally permits deductions authorized by the employee for their benefit, provided they don’t reduce pay below minimum wage or affect required overtime, according to the Fair Labor Standards Act.5U.S. Department of Labor. Fact Sheet #16: Deductions From Wages Under the Fair Labor Standards Act (FLSA)
Voluntary deductions can be pre-tax or post-tax. Pre-tax deductions are taken from gross pay before income taxes are calculated, lowering taxable income. Common pre-tax deductions, often offered through Section 125 cafeteria plans, include health insurance premiums and contributions to traditional 401(k)s, HSAs, and FSAs. The IRS sets annual contribution limits for these accounts (e.g., for 2024: $23,000 for 401(k)s, $4,150/$8,300 for HSAs, $3,200 for Health FSAs, with catch-up contributions available for older individuals).
Post-tax deductions are taken after taxes have been withheld and do not reduce current taxable income. Examples include Roth 401(k) contributions, some insurance premiums, union dues, and charitable donations via payroll. While post-tax charitable contributions don’t lower paycheck taxes, they may be deductible when filing annual returns.
Typical Range of Deductions
Pinpointing an exact average percentage for paycheck deductions is difficult due to individual variations. However, the baseline mandatory deduction for most employees is the 7.65% FICA tax on earnings up to the annual Social Security limit ($168,600 for 2024), plus 1.45% for Medicare on all earnings.
Federal and state income taxes add significantly to this base percentage. Withholding for these taxes depends on earnings, filing status, and W-4 information, reflecting progressive tax rates. The effective tax rate varies widely; IRS data for 2022 showed an average federal income tax rate of 14.5%, but individual rates differed greatly.
State and sometimes local income taxes further increase the total withholding percentage, with rates and structures varying by location. For higher earners, the Social Security tax stops at the wage limit, but the Medicare tax continues, potentially increasing to 2.35% on earnings above certain thresholds due to the Additional Medicare Tax.
Considering all mandatory withholdings (FICA, federal, state, local taxes), the total percentage deducted can range from just over 7.65% for lower earners to potentially exceeding 40% for high earners in high-tax states. Voluntary deductions for benefits and savings further reduce the final take-home pay amount.