Calculate federal & state withholding, FICA, pre-tax deductions, and net take-home pay — plus full employer costs.
For small business owners in restaurants, retail, and service industries, payroll taxes are one of the largest ongoing expenses — and one of the most misunderstood. Every dollar you pay an employee triggers several layers of mandatory withholding and employer-side contributions. This guide explains exactly how payroll taxes work in 2026 and what you can do to stay compliant while controlling labor costs.
Federal income tax is calculated using progressive brackets. Only the income within each bracket is taxed at that rate. The tables below show the 2026 brackets for each filing status (standard deduction already subtracted from taxable income).
| Taxable Income (Single) | Tax Rate | Tax Owed on This Bracket |
|---|---|---|
| $0 – $11,925 | 10% | Up to $1,192.50 |
| $11,926 – $48,475 | 12% | Up to $4,386.00 |
| $48,476 – $103,350 | 22% | Up to $12,073.00 |
| $103,351 – $197,300 | 24% | Up to $22,544.00 |
| $197,301 – $250,525 | 32% | Up to $17,031.00 |
| $250,526 – $626,350 | 35% | Up to $131,552.50 |
| Over $626,350 | 37% | Remaining income |
| Taxable Income (Married Filing Jointly) | Tax Rate |
|---|---|
| $0 – $23,850 | 10% |
| $23,851 – $96,950 | 12% |
| $96,951 – $206,700 | 22% |
| $206,701 – $394,600 | 24% |
| $394,601 – $501,050 | 32% |
| $501,051 – $751,600 | 35% |
| Over $751,600 | 37% |
| Taxable Income (Head of Household) | Tax Rate |
|---|---|
| $0 – $17,000 | 10% |
| $17,001 – $64,850 | 12% |
| $64,851 – $103,350 | 22% |
| $103,351 – $197,300 | 24% |
| $197,301 – $250,500 | 32% |
| $250,501 – $626,350 | 35% |
| Over $626,350 | 37% |
The 2026 standard deduction reduces an employee’s gross income before federal tax brackets are applied:
FICA taxes are split equally between the employee and employer. Both pay the same rates:
| Tax | Employee Rate | Employer Rate | Wage Base |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | First $168,600 |
| Medicare (HI) | 1.45% | 1.45% | All wages (no cap) |
| Additional Medicare | 0.9% | None | Wages over $200,000 (single) / $250,000 (MFJ) |
If your business is in one of these states, employees pay no state income tax on wages, which significantly increases their take-home pay:
Pre-tax deductions reduce an employee’s federal (and often state) taxable income before withholding is calculated, meaning both the employee and employer pay less in taxes:
Note: 401(k) and HSA contributions still have FICA applied — only federal and state income taxes are avoided on these amounts.
Beyond matching FICA, employers must pay several additional taxes per employee:
| Tax | Rate | Wage Base / Notes |
|---|---|---|
| Employer Social Security | 6.2% | First $168,600/yr per employee |
| Employer Medicare | 1.45% | All wages, no cap |
| FUTA (Federal Unemployment) | 0.6%* | First $7,000/yr per employee |
| SUTA (State Unemployment) | Varies | New-employer rate typically 2.7%; varies by state |
| Workers’ Compensation | Varies | Industry-based; restaurants ~1–2%, office ~0.3% |
*FUTA nominal rate is 6.0%, but employers receive a 5.4% credit for timely SUTA payments, resulting in an effective 0.6% rate in most states.
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For a single filer earning $3,000 bi-weekly ($78,000/year), annualized federal income tax is approximately $12,060 using 2026 brackets (after the $15,000 standard deduction, taxable income is $63,000). That’s about $464 per bi-weekly paycheck in federal income tax, plus $186 in Social Security and $43.50 in Medicare — roughly $693.50 in total federal withholding per period.
Gross pay is the total amount earned before any deductions. Net pay (take-home) is what remains after subtracting pre-tax deductions (401k, health insurance, HSA) and all taxes (federal, state, FICA). The gap between gross and net is typically 25–35% for a middle-income earner in a state with income tax.
Yes. Employers match the employee’s 6.2% Social Security contribution and 1.45% Medicare contribution for every dollar of wages paid. On a $50,000 salary, the employer pays an additional $3,825 in FICA matching on top of gross wages.
A traditional 401(k) contribution reduces your federal and (usually) state taxable income. Contributing $200 per pay period to a 401(k) saves approximately $44–$88 in income taxes per period depending on your marginal bracket. FICA taxes still apply to 401(k) contributions, however.
SUTA (State Unemployment Tax Act) funds your state’s unemployment insurance program. New employers typically receive a standard rate (often 2.7%). Over time your rate becomes “experience rated” — the fewer unemployment claims filed by former employees, the lower your rate. Low turnover directly lowers your long-term SUTA cost, making employee retention a measurable financial benefit.
This calculator uses regular wages only. Tipped employees have additional complexity: tips are taxable income but the employer must ensure wages plus tips meet the federal minimum wage ($7.25/hr), with a tip credit available in most states. Use the gross tip income as part of the hourly rate, or enter the total gross earnings per period including tips for an approximate withholding estimate.