Federal income tax, Social Security, and Medicare come out of every Texas paycheck

Texas has no state income tax, which means you keep more of your paycheck than workers in most other states. But federal taxes still come out. Your employer withholds federal income tax based on the W-4 form you filled out when you were hired, plus 6.2% for Social Security and 1.45% for Medicare. These three deductions appear on every paycheck for every worker in Texas.

The amount of federal income tax withheld depends on your filing status, how many dependents you claim, and your income level. If you claim zero dependents, more comes out. If you claim more dependents, less comes out. You can adjust this at any time by filling out a new W-4 with your employer — you do not have to wait until next year.

Social Security and Medicare are fixed percentages that do not change. Your employer also pays an equal amount on your behalf, but you only see your half on your paycheck. These taxes fund Social Security retirement benefits and Medicare health insurance for people 65 and older.

Key Takeaways

  • Texas has no state income tax, so federal income tax, Social Security, and Medicare are the only mandatory deductions from your paycheck.
  • Federal income tax withholding is based on your W-4 form and changes if you update it, while Social Security and Medicare are fixed percentages that never change.
  • You can adjust your federal withholding at any time by submitting a new W-4 to your employer if you want more or less money taken out.
  • Some employers also deduct health insurance premiums, retirement contributions, and other voluntary benefits, which reduce your take-home pay but are not taxes.

Why federal income tax withholding varies from paycheck to paycheck

Federal income tax is not a fixed percentage like Social Security and Medicare. Instead, your employer calculates it based on your W-4 answers and your pay frequency. If you are paid weekly, the calculation is different than if you are paid biweekly or monthly, even if your annual salary is the same.

The IRS publishes withholding tables that employers use to figure out how much to take. These tables account for your filing status (single, married, head of household), the number of dependents you claim, and any additional income or adjustments you listed on your W-4. If your circumstances change — you get married, have a child, take a second job, or your spouse starts working — your withholding may no longer match what you actually owe at tax time.

This is why some people get a refund and others owe money in April. A refund means your employer withheld too much. Owing money means your employer withheld too little. You can avoid both by adjusting your W-4 to match your actual tax situation.

Other deductions that are not taxes

Beyond the three mandatory federal deductions, your paycheck may have other money taken out. Health insurance premiums, dental, vision, life insurance, and 401(k) retirement contributions are common ones. These are not taxes — they are voluntary benefits you chose when you were hired, or that your employer requires as a condition of employment.

Some employers also deduct union dues, parking fees, or loan repayments. These all reduce your take-home pay but do not count as taxes. They appear separately on your pay stub so you can see exactly what came out and why.

If you are unsure what a deduction is, ask your HR or payroll department. They can explain each line on your pay stub and tell you whether it is optional or required.

How to read your pay stub in Texas

Your pay stub shows gross pay (what you earned before any deductions), each deduction listed separately, and net pay (what you actually receive). The federal income tax line shows what was withheld that pay period. The Social Security line shows 6.2% of your gross pay. The Medicare line shows 1.45% of your gross pay.

If you see a state income tax line on your pay stub, that is an error — Texas does not have state income tax. Contact your payroll department when ready to have it corrected. You may be may have access to to a refund of any state income tax withheld.

Your pay stub also shows year-to-date totals for each deduction. This tells you how much you have paid in federal taxes, Social Security, and Medicare so far this year. You will need these numbers when you file your tax return.

Adjusting your federal withholding if you are over or under-withheld

If you consistently get a large refund, you are having too much withheld. If you owe money every April, you are not having enough withheld. Either way, you can fix it by submitting a new W-4 to your employer.

The IRS provides a withholding calculator on its website that walks you through your situation and recommends how many dependents to claim. You do not have to claim the actual number of dependents you have — the number is just a tool to adjust your withholding. If the calculator says to claim five dependents and you have two children, you claim five.

Once you submit the new W-4, your employer will use it on your next paycheck. There is no waiting period. If you change jobs, you will need to fill out a W-4 with your new employer as well.

Self-employment taxes if you work for yourself

If you are self-employed or a freelancer in Texas, no one withholds taxes from your income. You are responsible for paying federal income tax, Social Security, and Medicare yourself, usually four times a year in estimated tax payments. Self-employed people pay both the employee and employer share of Social Security and Medicare, which totals 15.3% instead of the 7.65% that employees pay.

You will also owe Texas franchise tax if your business earns more than a certain amount, though this is not an income tax — it is a tax on the privilege of doing business in the state. The threshold and rate depend on your business structure and revenue.

Keeping records of your income and expenses throughout the year makes tax time much simpler. Many self-employed people set aside 25% to 30% of their income to cover federal taxes, self-employment taxes, and any state obligations.

What happens if your employer withholds the wrong amount

If your employer withholds too much federal income tax, you will get a refund when you file your tax return. The IRS does not pay interest on refunds, so there is no penalty to you — you straightforward get your money back, usually within a few weeks of filing.

If your employer withholds too little, you will owe the difference when you file. The IRS may charge interest and penalties if you owe a large amount, so it is better to adjust your W-4 early if you realize the problem during the year.

Errors can happen. If your employer withheld state income tax by mistake, contact payroll when ready. Texas does not have state income tax, so any state withholding is incorrect and should be refunded to you.

Frequently Asked Questions

Does Texas have state income tax?

No. Texas has no state income tax, which is why your paycheck only has federal income tax, Social Security, and Medicare withheld. This is one of the reasons Texas has lower overall tax burden than many other states.

Can I claim zero dependents to have more money withheld?

Yes. Claiming zero dependents increases your federal withholding, which is useful if you have multiple jobs, side income, or expect to owe taxes. You can claim any number on your W-4 regardless of how many dependents you actually have — the number is just a withholding tool.

What is the difference between gross pay and net pay?

Gross pay is what you earned before any deductions. Net pay is what you actually receive after federal income tax, Social Security, Medicare, and any other deductions are taken out. Your pay stub shows both so you can see the full picture.

Do I have to pay Social Security and Medicare taxes if I am self-employed?

Yes, and you pay both the employee and employer share, totaling 15.3% of your net self-employment income. Employees only pay 7.65% because their employer pays the other half, but self-employed people are both employer and employee.

What should I do if I see state income tax on my Texas paycheck?

Contact your payroll or HR department when ready. Texas does not have state income tax, so this is an error. Ask them to correct it and refund any state income tax already withheld from your paychecks.