Question 1

What is FICA and how much is deducted from my paycheck?

Accepted Answer

FICA stands for Federal Insurance Contributions Act and includes Social Security tax (6.2% on income up to $176,100 in 2025) and Medicare tax (1.45% on all income, plus an additional 0.9% on income above $200,000). Combined, most employees pay 7.65% of their gross pay in FICA taxes.

Question 2

How do pre-tax deductions like 401(k) affect my take-home pay?

Accepted Answer

Pre-tax deductions like 401(k) contributions reduce your taxable income, which lowers your federal and state income tax. However, they do not reduce FICA taxes (Social Security and Medicare are calculated on gross pay). For example, a $500/month 401(k) contribution might save you $110-$160/month in income taxes depending on your bracket, so the net cost to your paycheck is only $340-$390.

Question 3

Which states have no income tax?

Accepted Answer

Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire (dividends and interest only), South Dakota, Tennessee, Texas, Washington, and Wyoming. Living in a no-income-tax state can increase your take-home pay by 3-13% compared to high-tax states like California or New York.

Deduction	Details
Federal Income Tax	Progressive brackets: 10% to 37%
Social Security (OASDI)	6.2% on first $176,100 (2025)
Medicare	1.45% + 0.9% additional above $200k
State Income Tax	0-13% depending on state
401(k) / Pre-tax deductions	Reduces taxable income (not FICA)

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