A new college graduate with a starting salary of $60,000 can expect to pay about $14,000 in income taxes. Here’s why.
Five taxes shrink your paycheck: Social Security, Medicare, federal, state, and local taxes. Social Security and Medicare are flat taxes. Every worker pays a tax of 6.2% for Social Security and 1.45% for Medicare.
The remaining three taxes – federal, state, and local – vary widely based on where you live and how much you earn.
You pay zero state income tax if you live in Texas, Florida, Washington, Nevada, South Dakota, Wyoming and Alaska. The remaining 43 states have an income tax, but rates vary. Pennsylvania, Indiana and North Dakota charge under 4%, while California has the highest marginal tax rate in the country at 13.3%.
Does that mean Pennsylvania is a good deal? Not so fast. Some towns in Pennsylvania charge local tax. For example, Philadelphia’s local tax is 3.75%.
The second big factor affecting your tax bill is how much you earn. The federal government and 33 states use a “progressive” system. Your tax rate rises as your income increases.
For the 2026 tax year, the federal government continues to use seven tax brackets with rates of 10%,12%, 22%, 24%, 32%, 35%, and 37%.
If you think 37% sounds awful – don’t worry. That rate is only applied to income over half a million dollars.
Progressive taxation is complicated.
Watch our FREE webinar entitled The Five Keys to a Successful Start to learn how progressive taxes work.