How Income Taxes Work in Federal Only (No State Tax) (2025/2026)
When you earn income living or working in Federal Only (No State Tax), your pay is subject to three separate layers of tax withholding: federal income taxes, FICA payroll taxes, and state taxes.
1. Federal Income Tax
The IRS taxes income using progressive brackets ranging from 10% to 37% for the 2025/2026 tax year. Before applying these brackets, your gross income is reduced by either the standard deduction or itemized deductions. For single filers, the 2025 standard deduction is $15,000; for married couples filing jointly, it is $30,000.
2. FICA Payroll Taxes
Every employee in the United States pays FICA taxes, which fund Social Security and Medicare:
- Social Security: 6.2% on all wages up to the 2025 wage cap of $176,100.
- Medicare: 1.45% on all earnings with no ceiling, plus an additional 0.9% for high-income earners above $200,000 ($250,000 married).
3. Federal Only (No State Tax) State Income Tax
Federal Only (No State Tax) does not levy a personal income tax on earned wages. This provides significant savings for residents compared to high-tax states like California or New York. You only pay federal income tax and FICA taxes.