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Start with gross pay, then subtract federal income tax (per W-4 withholding tables), Social Security (6.2% of wages up to $176,100 in 2025, $184,500 in 2026), Medicare (1.45%, plus 0.9% above $200,000), state income tax (varies by state, 0%–13.3%), local taxes if any, and pretax deductions (401(k), HSA, health insurance). Net is typically 65%–80% of gross.

Bonuses aren't actually taxed at a higher rate - they're withheld at a flat 22% federal supplemental rate (37% above $1 million). At tax time, the bonus is treated as ordinary income. If your marginal rate is below 22%, you'll get the difference back as a refund; if it's higher, you'll owe the difference. Either way, the actual tax liability is the same as on regular wages.

The W-4 controls how much federal income tax your employer withholds. Claiming dependents, additional income, or extra withholding all change the calculation. The IRS Tax Withholding Estimator helps fine-tune the W-4 so you neither owe a big tax bill nor get a huge refund (which is essentially an interest-free loan to the government).

Common pretax deductions include traditional 401(k) contributions (up to $23,500 in 2025, plus $7,500 catch-up at 50+), HSA contributions ($4,300 individual / $8,550 family in 2025), FSA contributions, traditional IRA contributions (if eligible), and most employer health, dental, and vision premiums. Each $1,000 in pretax contributions saves $220–$370 in federal tax depending on your bracket.