🧾 Taxes, Demystified · Lesson 7 of 8 · 90 sec
Where Did Half My Paycheck Go?
💸 You earned $1,000 but the check says $760. The missing $240 did not vanish — it went to a very specific list of places, and knowing them is half of adulting.
💡 Key idea
Gross is what you earn; net is what hits your account. Your W-4 controls how much federal tax is withheld.
🧠 Why it matters
Gross pay is what you earned. Net pay (take-home) is what is left after deductions. The big ones: federal income tax (set by the W-4 you filled out), FICA — Social Security at 6.2% plus Medicare at 1.45% — state tax where you live, and any pre-tax choices like 401(k) or health insurance. The W-4 is the dial that controls how much federal tax they hold back.
🌍 In the real world
🧾 A new grad saw a $58,000 salary and mentally spent the $4,833 a month. The first check landed around $3,500. Nothing was stolen — federal tax, FICA, state tax, and his health premium took the rest. Once he saw the line items, he tuned his W-4 so he was not massively overpaying just to get it back as a refund a year later.
📌 Takeaways
- Gross is earned, net is take-home after deductions
- FICA (Social Security + Medicare) is about 7.65% and not optional
- Your W-4 sets federal withholding — tune it so you neither owe big nor overpay
📖 Terms in this lesson
Payroll tax (FICA): Social Security and Medicare tax taken from every paycheck, split between you and your employer.
✅ Test yourself
What is the difference between gross and net pay?
- Nothing
- Gross is before deductions, net is what you actually take home
- Net is before taxes
- Gross is your bonus
Answer: B · Gross is before deductions, net is what you actually take home
Gross is the headline number; net is what lands after taxes and deductions.
What does the W-4 form control?
- Your salary
- How much federal income tax is withheld from each check
- Your 401(k) match
- Your credit score
Answer: B · How much federal income tax is withheld from each check
The W-4 is the dial for federal withholding — tune it to avoid a big bill or a big overpayment.
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