A W-2 job comes with automatic tax withholding, which is convenient but also makes it easy to lose track of exactly how much of your salary you'll actually keep. Two separate calculations — federal income tax and FICA — combine to determine your real net pay, and they don't work quite the same way.
Federal income tax is calculated on your taxable income, which is your salary minus the standard deduction (or itemized deductions, if higher), run through progressive tax brackets. FICA, by contrast, is calculated directly on your gross wages, with no deduction applied first — it's a flat 7.65% (6.2% Social Security plus 1.45% Medicare) on essentially all of your salary, up to the Social Security wage base cap.
How Net Pay Is Calculated
Taxable Income = Gross Salary − Standard Deduction
Federal Tax = calculated via progressive brackets on Taxable Income
FICA = Gross Salary × 7.65%
Estimated Net Pay = Gross Salary − Federal Tax − FICA
A Worked Example
On a $75,000 salary (single filer), subtracting the standard deduction leaves roughly $60,400 in taxable income, producing an estimated federal tax of about $6,700. FICA on the full $75,000 gross comes to $5,738. Combined, estimated net pay works out to about $62,560 annually — before any state tax or pre-tax deductions like 401(k) contributions are factored in, which would reduce it further.
Common Mistakes to Avoid
- Forgetting state tax entirely: this calculation covers only federal tax and FICA — most states add their own income tax on top, further reducing take-home pay.
- Not accounting for pre-tax deductions: 401(k) contributions and health insurance premiums lower your taxable income for federal tax purposes (though not for FICA), which changes the real net figure.
- Assuming FICA has the same deductions as income tax: FICA is calculated on gross wages directly, unaffected by the standard deduction that reduces income tax.
- Ignoring the Social Security wage base cap: very high earners stop paying the Social Security portion of FICA above a certain annual wage threshold, though the Medicare portion continues.
Bottom Line
W-2 take-home pay comes down to two distinct calculations stacked together. Use a W-2 Tax Calculator to estimate your real net pay from your gross salary, before state tax and personal deductions are layered on top.