Gross pay is the number on your offer letter, before anything is taken out. Knowing exactly what it includes and what comes out of it helps you read a pay stub and estimate your take-home pay.
This guide defines gross pay, lists the federal deductions for 2026 with the Publication 15 rates and shows worked examples, using IRS Publication 15 and Notice 2025-67.
The IRS says wages subject to federal employment taxes generally include all pay an employer gives an employee for services performed, in cash or in other forms. That includes salaries, vacation allowances, bonuses, commissions and taxable fringe benefits. Gross pay is that total for a pay period, before taxes, benefit contributions and other deductions are taken out. What is left after those deductions is net pay; see our net vs gross income guide and the pay stub guide.
| Deduction | 2026 rule (Publication 15) |
|---|---|
| Social security (employee share) | 6.2% of wages up to the $184,500 wage base |
| Medicare (employee share) | 1.45% of all covered wages, with no wage base limit |
| Additional Medicare Tax | 0.9% on wages above $200,000 in a calendar year, employee only |
| Federal income tax | Withheld from your pay based on your Form W-4; bonuses and other supplemental wages are generally withheld at a flat 22% (37% over $1 million in the year) |
| Pre-tax benefits and retirement | Cafeteria plan benefits may be excluded from social security and Medicare wages; the 2026 limit on 401(k) employee deferrals is $24,500 |
Next year: the Social Security Administration has announced that the 2027 social security wage base will be $192,300 (up from $184,500). This applies to 2027 wages only; the 2026 figures above still apply to 2026 pay. See our 2027 wage base guide.
State and local income tax, state payroll programs and voluntary deductions such as insurance premiums vary by employer and state and are not covered by these federal figures. See our Form W-4 guide for how income tax withholding is set and our Form W-2 guide for how wages are reported.
| Gross pay | Social security 6.2% | Medicare 1.45% | Left before income tax and other deductions |
|---|---|---|---|
| $1,000 | $62.00 | $14.50 | $923.50 |
| $2,000 | $124.00 | $29.00 | $1,847.00 |
The most social security tax an employee can pay in 2026 is 6.2% of the $184,500 wage base, which is $11,439. Because the Medicare rate has no wage limit, 1.45% applies to every dollar, and wages above $200,000 in a year also carry the 0.9% Additional Medicare Tax. These examples ignore income tax, pre-tax deductions and state taxes.
Gross pay is one pay period's total pay from one employer. Gross income on a tax return is wider: it can include interest, dividends, business income and other items, and your taxable wages in box 1 of Form W-2 can be lower than gross pay because some pre-tax deductions reduce them. Which deductions reduce which wages differs: for example, cafeteria plan benefits may be excluded from social security and Medicare wages. Check your Form W-2 boxes rather than assuming gross pay equals taxable wages.
IRS: Publication 15 (Circular E), Employer's Tax Guide, IRS: Notice 2025-67, 2026 amounts relating to retirement plans and IRAs, Federal Register: SSA, Cost-of-Living Increase and Other Determinations for 2027.