Federal vs. State Payroll Taxes: A Simple Guide

Two governments take a bite out of most paychecks: the federal government and your state. They use different rules, and confusing them is one of the most common paycheck mistakes.

Federal payroll taxes

Federal withholding has two parts. The first is federal income tax, which is progressive and depends on your filing status, income, and deductions. The second is FICA, which funds Social Security and Medicare.

• Social Security: 6.2% of wages up to $184,500 in 2026.
• Medicare: 1.45% of all wages.
• Additional Medicare: 0.9% above $200,000 single / $250,000 joint.

FICA is not reduced by the standard deduction, and traditional 401(k) contributions generally do not reduce FICA wages. Health insurance premiums under a Section 125 plan usually do reduce FICA wages.

State payroll taxes

State income tax rules vary more than federal rules. There are three broad structures:

• No wage income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington (wages), and Wyoming.
• Flat tax: one rate applies above a threshold, for example Illinois at 4.95% or Pennsylvania at 3.07%.
• Graduated tax: rates rise with income, as in California, New York, and Minnesota.

Some states also have local or city income taxes. New York City, for example, adds a local tax on top of New York State tax. Our calculator excludes local taxes, so your real withholding may be higher if you live in one of those places.

Why the state matters so much

On a $60,000 salary, the federal side is the same everywhere. The state side is not. A single filer can pay $0 in Texas or Florida, a few hundred dollars in a low flat-tax state, or about $1,800 in California. Over a year, that difference can be thousands of dollars.

When you compare job offers, compare net pay in the state where you will actually live. A $70,000 offer in a high-tax city can leave less take-home pay than a $65,000 offer in a no-tax state.

Remote work and reciprocity

If you work remotely, your state of residence and your employer's state can both matter. Some states have reciprocity agreements; others tax work performed inside their borders. This is fact-specific, so check the state tax agency or a tax professional before relying on an estimate.

Calculate your 2026 take-home pay by state →