W-2 Calculator

Form W-2 (Wage and Tax Statement) is the official IRS tax document provided annually by employers detailing gross compensation, statutory tax withholdings, and pre-tax benefit deductions. Key boxes include: Box 1 (Taxable Federal Wages, which excludes pre-tax 401(k), HSA, and Section 125 deductions); Box 2 (Federal Income Tax Withheld); Box 3 (Social Security Wages, capped at $176,100 for 2026, which includes 401(k) contributions); Box 4 (Social Security Tax Withheld at 6.2%); Box 5 (Medicare Wages, uncapped); Box 6 (Medicare Tax Withheld at 1.45% + 0.9% additional); Box 16 (State Taxable Wages); and Box 17 (State Income Tax Withheld).

Box 1 and Box 3 differ primarily because of employer-sponsored retirement plans. Under Internal Revenue Code § 3121(v), contributions to traditional 401(k) or 403(b) retirement plans reduce your federal income taxable wages (Box 1), but are NOT exempt from FICA payroll taxes (Boxes 3 and 5). Consequently, if you earn $100,000 and contribute $10,000 to a 401(k), Box 1 will report $90,000 while Box 3 and Box 5 will report $100,000.

Under the Federal Insurance Contributions Act (FICA), employee payroll taxes consist of: (1) Social Security (OASDI): 6.2% on earnings up to the 2026 wage base cap of $176,100 (maximum employee withholding of $10,918.20); (2) Medicare (HI): 1.45% on all earnings without any dollar cap; (3) Additional Medicare Tax: 0.9% on wages exceeding $200,000 (Single/HoH) or $250,000 (Married Filing Jointly). Employers match the 6.2% Social Security and 1.45% Medicare taxes dollar-for-dollar, but do not match the 0.9% Additional Medicare surtax.

For tax year 2026, the elective employee deferral limit for traditional and Roth 401(k), 403(b), and most 457 plans is $24,500. Workers aged 50 and older can make an additional standard catch-up contribution of $7,500 ($32,000 total). Under the SECURE 2.0 Act, employees aged 60 through 63 qualify for an enhanced "super catch-up" limit of $11,250 ($35,750 total). Total combined contributions (employee elective deferrals plus employer match and profit sharing) cannot exceed $70,000 in 2026.

Internal Revenue Code Section 125 authorizes "cafeteria plans," which allow employees to pay for qualified benefits using pre-tax payroll deductions. These benefits — including employer-sponsored health, dental, and vision insurance premiums, healthcare flexible spending accounts (FSAs), and Health Savings Accounts (HSAs) — are uniquely exempt from federal income tax, state income tax, AND employee/employer FICA payroll taxes (7.65%), providing the highest statutory tax savings of any workplace benefit.

Paycheck frequency does not alter your total annual federal or state tax liability, but it dictates how much is deducted on each pay date. Annual compensation is divided across pay dates: Weekly (52 pay periods), Bi-weekly (26 pay periods, every two weeks), Semi-monthly (24 pay periods, typically the 15th and last day of the month), or Monthly (12 pay periods). Bi-weekly employees experience two months each year with three paychecks ("three-paycheck months"), which can provide temporary budget surpluses.

A W-2 employee has federal and state taxes withheld automatically by their employer and only pays the 7.65% employee share of FICA, with the employer funding the other 7.65%. A 1099 independent contractor receives gross payments with zero tax withheld and is personally responsible for paying the entire 15.3% Self-Employment Tax (SECA) via quarterly estimated payments, in addition to federal and state income taxes.

To adjust your per-paycheck tax withholding, submit a revised IRS Form W-4 (Employee's Withholding Certificate) to your employer's HR or payroll department. You can increase withholding by claiming an additional dollar amount on Step 4(c) to avoid year-end tax penalties, or decrease withholding by accounting for eligible dependents on Step 3 or itemized deductions on Step 4(b).