Methodology & sources

The order of operations

Tax is sequential, and the order matters more than most people realise. We work down your gross pay like this:

1. Pre-tax deductions. A traditional 401(k) comes out of federal taxable wages (W-2 Box 1) but not Social Security and Medicare wages (Boxes 3 and 5). Section 125 benefits — employee health premiums, HSA and FSA contributions — come out of all three. Getting this distinction wrong is the most common error in salary calculators, and it changes the answer by hundreds of dollars.
2. FICA. Social Security at 6.2% of wages up to $184,500, then nothing. Medicare at 1.45% on every dollar, plus 0.9% Additional Medicare Tax above $200,000 (single) or $250,000 (joint).
3. Federal income tax. We subtract the larger of your standard or itemised deduction, apply the 2026 brackets to what remains, then subtract the Child Tax Credit and the credit for other dependents.
4. State income tax. Each state starts from a different base — federal taxable income, federal AGI, or raw wages — then applies its own deduction, exemptions, schedule and credits.
5. Local income tax. City or county tax, where it exists, computed on state taxable income. Yonkers is the exception: it is a surcharge on your New York State tax rather than a rate on income.
6. State payroll contributions. Employee-funded disability and paid family leave programmes — California SDI, New York PFL, New Jersey TDI/FLI, Washington PFML and WA Cares, and others.
7. Post-tax deductions. Roth 401(k) and anything else after tax.

What we simplify

We would rather tell you than let you find out. These are deliberate simplifications:

• We estimate liability, not withholding. Your employer withholds using Publication 15-T and your W-4. The two approximate the same number by different routes, and the gap is what produces a refund or a bill.
• Wage income only. No capital gains, dividends, self-employment income, rental income or the Net Investment Income Tax.
• Full-year employment at one rate in a single state, with no mid-year move or raise.
• Credits are non-refundable here. We never let a credit push your tax below zero, because the refundable portion depends on facts a paycheck estimator cannot see.
• No state credits beyond exemption credits. Earned income credits, property tax credits and renter credits are out of scope.
• Phase-outs are mostly not modelled. Several states taper their standard deduction or personal exemption as income rises; we apply the full amount. Those states are marked Approximate below.
• 401(k) deferrals are capped at the $24,500 elective deferral limit, shared across traditional and Roth. Catch-up contributions for over-50s are not included.
• Bonuses are treated as ordinary wages, not at the 22% flat supplemental withholding rate.