How Income Tax Works in the United States

Income tax in the United States is made up of several different components. The biggest are federal income tax, Social Security tax and Medicare tax. Many states also apply their own income taxes.

Federal Income Tax

The federal government uses progressive tax brackets. This means higher portions of income are taxed at higher rates.

Before calculating federal income tax, most workers subtract the standard deduction from their salary.

Social Security Tax

Employees pay 6.2% Social Security tax on earnings up to the wage base limit. Employers match this contribution.

Medicare Tax

Medicare tax is charged at 1.45% of income with no income cap for most workers.

Example Salary Calculations