Trace annual wages, estimated taxes, contributions and available cash. The examples use their stated tax year and assumptions.

Where Your Paycheck Goes

The 2026 federal brackets run from 10% to 37%. Social Security applies to covered wages up to $184,500. Medicare has no regular wage cap, and additional Medicare tax can apply. Your paystub may differ because actual withholding depends on payroll and Form W-4.

The Power of Pre-Tax Deductions

Traditional employee deferrals reduce modeled federal income-tax wages but do not reduce Social Security or Medicare wages. Roth deferrals do not reduce either tax base. Qualified cafeteria-plan health premiums and payroll HSA contributions reduce the modeled federal and payroll-tax bases. After-tax health premiums do not. A qualified direct HSA contribution can reduce modeled income tax but does not reduce payroll-tax wages. The employee deferral is one combined traditional and Roth amount. The 2026 base ceiling is $24,500; confirmed catch-up can add $8,000 from age 50, or $11,250 at ages 60–63, subject to plan rules and compensation. Required Roth catch-up changes its tax treatment, not the total ceiling.

Marginal vs. Effective Tax Rate

The federal marginal rate applies to the next taxable dollar. Lower brackets still apply to earlier dollars. The federal effective rate and the combined federal, FICA and state burden answer different questions.

The W-2 vs. 1099 Tradeoff

The contractor scenario uses business profit after expenses. Schedule SE generally applies the 15.3% regular rate to 92.35% of profit, with a Social Security cap and possible Additional Medicare Tax. The deductible half of regular self-employment tax already reduces the modeled federal tax. The estimate excludes QBI and separate self-employed benefits or retirement elections.

How State Taxes Affect Your Take-Home Pay

For ordinary North Carolina wages in this 2026 model, the liability rate is 3.99%. Standard deductions are $12,750 for single or married filing separately, $25,500 for married filing jointly, and $19,125 for head of household when eligible. Payroll withholding can differ. Other-state proxies use a flat rate after a $13,000 model deduction and federal-style adjustments. They do not calculate state returns, local taxes or state HSA conformity.