INCOME CALCULATOR

The US uses a progressive tax system with marginal tax brackets. Your income is taxed in layers: the first $12,400 (single, 2026) at 10%, the next $38,000 at 12%, and so on through the 37% bracket for income over $640,600. Only the portion of income in each bracket is taxed at that rate—moving into a higher bracket doesn't retroactively increase taxes on your lower income. Your effective tax rate (total taxes ÷ total income) is always lower than your top marginal rate.

Gross income is your total earnings before any deductions—your salary or hourly wage times hours worked. Net income (take-home pay) is what you actually receive after all deductions: federal and state income taxes, Social Security (6.2%), Medicare (1.45%), health insurance premiums, retirement contributions (401k, etc.), and other benefits. Net income is typically 60-75% of gross income depending on your tax bracket and deductions.

Traditional 401(k) contributions reduce your taxable income now—you pay taxes when you withdraw in retirement. Roth 401(k) contributions are made with after-tax dollars, but withdrawals in retirement are tax-free. General guidance: choose Roth if you're early in your career and expect to be in a higher tax bracket later, or if you want tax diversification. Choose Traditional if you're in peak earning years and want the immediate tax deduction. Many advisors suggest splitting contributions for flexibility.

At minimum, contribute enough to get your full employer match—it's free money. Beyond that, aim for 15% of gross income toward retirement (including employer contributions). The 2026 401(k) contribution limit is $24,500 ($32,500 if 50+). If 15% feels impossible, start with what you can and increase by 1% each year. If you're behind on retirement savings, prioritize maxing out your 401(k) after building a basic emergency fund.

It depends on your state. Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire (dividends/interest only), South Dakota, Tennessee, Texas, Washington, and Wyoming. Other states range from flat taxes around 3-5% (Colorado, Illinois, Michigan) to progressive systems reaching 13%+ (California, New York City residents). State taxes significantly impact take-home pay—a factor to consider when evaluating job offers in different locations.

FICA (Federal Insurance Contributions Act) funds Social Security and Medicare. Social Security tax is 6.2% of income up to $184,500 (2026)—your employer pays another 6.2%. Medicare tax is 1.45% on all income with no cap—plus an additional 0.9% on income over $200,000. These taxes fund your future Social Security retirement benefits and Medicare health coverage. They're mandatory and apply to virtually all employment income.

Several strategies reduce taxable income: maximize 401(k)/403(b) contributions ($24,500 limit, 2026), contribute to a Traditional IRA ($7,500 limit), use an HSA if you have a high-deductible health plan ($4,400 individual, $8,750 family), contribute to an FSA for healthcare/dependent care expenses, and itemize deductions if they exceed the standard deduction ($15,750 single, $31,500 married, 2026). Each dollar in pre-tax accounts saves you at your marginal tax rate.