Why your first 2027 paycheck is smaller (or bigger)

By DecisionSheet · Updated October 22, 2026 · 2026 tax figures

The first paycheck of a new year is the one most likely to look wrong, and it usually is not. Several things change on January 1 at the same moment, and the pay stub shows the new amounts without the reasons. This page goes through the reasons in the order they usually matter, then puts two pay stubs side by side, the last one of 2026 and the first one of 2027, and accounts for every dollar of the difference.

A note on timing. This guide was written in October 2026. Some 2027 figures are already official (the Social Security wage base and the HSA limits), and they are used below. Others (the federal tax brackets, the withholding tables, the 401(k) and health FSA limits) have not been published yet. Where that is the case the page says so, gives the 2026 figure labeled as such, and does not guess at the new one.

1. Social Security starts again

Social Security tax is 6.2% of wages up to a yearly cap, the wage base. For 2026 the cap is $184,500; for 2027 it is $192,300, $7,800 higher (IRS, 2027 Publication 15 draft; SSA, contribution and benefit base). Once your wages from an employer pass the cap, that employer stops withholding Social Security, and every remaining check of the year is 6.2% bigger.

On January 1 the count starts over. If you passed the cap in 2026, your first 2027 check has Social Security on it again, and it will stay there until you pass $192,300. For high earners this is usually the largest single reason the January check is smaller than the December one. Medicare tax (1.45%) has no cap and does not change.

Over a full year, someone above the cap both years pays at most $11,439.00 of Social Security in 2026 and $11,922.60 in 2027, $483.60 more. If you changed jobs during the year, each employer withholds up to the cap separately; any excess comes back as a credit on your tax return.

2. The extra 0.9% Medicare tax stops (for now)

An employer must withhold an Additional Medicare Tax of 0.9% on wages it pays you above $200,000 in a calendar year, starting with the pay period in which you cross it, whatever your filing status. That threshold also resets on January 1, so someone who crossed it in 2026 sees the 0.9% disappear in January, and come back once they pass $200,000 again. The threshold is not indexed for inflation.

The tax you actually owe uses a different threshold: $200,000 single, $250,000 married filing jointly. A couple whose combined wages pass $250,000 while neither one passes $200,000 at one employer can owe the tax with nothing withheld for it; one spouse over $200,000 in a couple under $250,000 has too much withheld and gets it back at filing.

3. New withholding tables and brackets

Employers figure federal withholding from IRS Publication 15-T, which is published for each year. The rates themselves (10% to 37%) are permanent under Pub. L. 119-21, but the bracket thresholds and the standard deduction are indexed for inflation every year, and the tables follow them. When the brackets rise, the same pay usually has slightly less withheld.

The 2027 figures are not out yet. As of October 22, 2026, the IRS has not published the 2027 brackets and standard deduction (it did so for 2026 in Rev. Proc. 2025-32, announced on October 9, 2025) or the 2027 Publication 15-T (the 2026 edition is dated December 2025). The worked example below therefore uses the 2026 tables for both checks and shows no number for this step. Once the 2027 tables are out, the federal line will move by a small amount on top of what is shown.

4. Open enrollment: premiums, HSA, FSA

Elections made in open enrollment usually take effect with the plan year, which for most employers starts January 1:

• Health, dental and vision premiums paid through a cafeteria plan come out before income tax and before Social Security and Medicare. A premium that rises by a dollar lowers take-home pay by less than a dollar.
• HSA contributions through payroll are also exempt from income tax and FICA. The 2027 limits are published: $4,500 for self-only coverage and $9,000 for family coverage, up from $4,400 and $8,750 (Rev. Proc. 2026-24), plus $1,000 from age 55. Spreading the new limit over the year raises each check's contribution a little. The HSA vs. PPO calculator compares the two kinds of plan on premiums and claims.
• A health FSA election is a new per-paycheck deduction (or a different one) from January. The 2026 limit is $3,400; the 2027 limit comes with the IRS's annual inflation adjustments and has not been published.
• A dependent care FSA is limited to $7,500 a household, a figure set in the statute and not indexed, so it is the same for 2027. The dependent care FSA calculator shows whether the FSA or the child care credit is worth more.

5. 401(k) changes

A new deferral percentage, or an automatic yearly increase, usually starts with the first check of the year. A pre-tax 401(k) deferral lowers income tax withholding but not Social Security or Medicare, so take-home pay falls by the deferral less your withholding rate. A Roth deferral lowers take-home pay by the full amount.

The opposite can happen too: if you reached the yearly limit in 2026 and your deferrals stopped in the fall, they start again in January, and the January check is smaller for that reason alone. The 2026 limit is $24,500; the IRS has not announced the 2027 limit yet. It announced the 2026 one on November 13, 2025 (IR-2025-111). The 401(k) catch-up guide covers the 2026 limits and the new Roth catch-up rule.

6. State and local tax

States set their own withholding. Many adjust brackets or standard amounts each January, some change rates, and a move to another state, or a change in where you work, changes the state line completely. Several states have no tax on wages at all. Local wage taxes in some cities and counties change on their own schedule. The example below leaves state and local tax out; compare that line on your own stubs directly.

The example: December to January, line by line

• The employee. Single, paid every two weeks (26 checks a year), with a Form W-4 from 2020 or later and nothing entered in Steps 2 to 4.
• 2026. A salary of $208,000 ($8,000.00 a check), a 6% pre-tax 401(k), a $120.00 health premium and $169.23 into an HSA each check (the $4,400 self-only limit spread over the year).
• 2027. A 3% raise to $8,240.00 a check, the 401(k) raised to 8% at open enrollment, the premium up to $138.00, and the HSA up to $173.07 a check for the new $4,500 limit.

This employee's 2026 wages passed $184,500 before the 25th check, so from that check on there was no Social Security to withhold. The last check of the year was the first to pass $200,000 and carry the 0.9%.

Federal income tax on both checks uses the 2026 Publication 15-T percentage method, the only tables published so far.

Now the same change taken one cause at a time, in order, each step's effect on net pay with everything before it already applied:

What the steps show:

• Social Security is the big one. $478.07, 6.2% of the check's Social Security wages, more than the rest of the changes combined.
• The raise does not cover it. $240.00 more gross pay adds only $153.10 to take-home pay after the 401(k) percentage, FICA and withholding at 24% take their share.
• Pre-tax changes cost less than they look. The 401(k) deduction rose $164.80, but net pay fell only $125.25, because withholding fell by 24% of it. The premium rose $18.00 and cost $12.30: it is also exempt from Social Security and Medicare, so 31.65% of it comes back.

It does not last all year. With 2027 pay, this employee passes the $192,300 wage base during the 25th check, which carries only $124.35 of Social Security, and the last check of the year has none, so take-home pay rises again in December. The 0.9% starts with the 26th check.

Before January: the room left in 2026

The 401(k) limit resets in January along with everything else, so room you don't use in 2026 is gone. The same employee, age 45, has deferred $10,080 so far at 6% and has 5 checks left. Reaching the $24,500 limit takes $14,420 more, $2,884 a check (36% of pay). It would lower 2026 federal income tax by $3,461 and take-home pay by $10,959. The calculator works from salary alone, without the premium and HSA; the employee is in the 24% bracket either way. Open this scenario.

Doing that would change the December check too; the comparison above assumes the employee stays at 6%.

A bonus in January, or a new W-4

Two more things make one check look unlike the others.

A bonus. An employer that pays a bonus separately from regular pay can withhold a flat 22% of it for federal income tax (37% on supplemental pay above $1 million in a year), and the 2027 draft of Publication 15 says that rate stays the same. Or it can add the bonus to a regular check and withhold on the total as if it were the normal pay every period, which pushes it into a higher row of the table. For this employee, a $10,000 bonus would have $2,200.00 withheld at the flat rate, or $3,315.06 added to a regular check (the table's 35% row), while it actually adds $2,400.00 to the year's federal tax on the 2026 brackets. Neither withholding is the tax; the difference settles on the return.

A new W-4. Every change to a Form W-4 changes withholding from the next payroll that uses it. Entering $2,200 of credits in Step 3 (one child under 17 at the 2026 child tax credit) cuts withholding by a 26th of that, $84.62 a check for this employee. The IRS's draft Publication 15 for 2027 asks employers to encourage employees to file an updated W-4 for 2027, especially if they owed tax or got a large refund for 2026. The IRS Tax Withholding Estimator works out what to enter.

How to check your own stubs

1. Put the last check of 2026 beside the first of 2027. Check that both cover a full pay period and neither has a bonus, a correction or a missed deduction.
2. Compare gross pay first. A raise, fewer hours or a different number of days in the period explains gross changes.
3. Go through each pre-tax deduction (401(k), premiums, HSA, FSA), then Social Security, Medicare, federal and state tax, then after-tax deductions.
4. Social Security should be 6.2% of Social Security wages until the year-to-date column reaches the wage base, then zero. Social Security still taken after year-to-date wages pass the base is worth asking payroll about.
5. If federal withholding moved and nothing else explains it, ask payroll which W-4 they have on file.

Assumptions and limits

• The example is one employee with one employer, single, paid every two weeks, with a 2020-or-later Form W-4 and nothing in Steps 2 to 4. Federal withholding follows Worksheet 1A of Publication 15-T (2026): annualized taxable wages less $8,600, on the STANDARD schedule, divided by 26, to the cent.
• Both checks use the 2026 withholding tables because the 2027 ones are not published. The 2027 wage base and HSA limits are the published ones.
• The premium and HSA go through a cafeteria plan (no income tax, no Social Security or Medicare); the 401(k) is pre-tax for income tax only. The bonus is assumed to carry no 401(k) deferral.
• Not modeled: state and local tax, Roth deferrals, after-tax deductions, the earlier pay stubs of a year with a different raise date, and employers that round withholding to whole dollars.
• This is a model of tax rules, not tax advice. Your employer's payroll records and your plan documents decide what is actually withheld.

Method and sources

The pay stubs are computed in this guide's data file from the site's tax constants: each check's Social Security, Medicare and Additional Medicare from its own year-to-date wages, and federal withholding by the Publication 15-T percentage method, which for the 2026 tables equals the bracket tax on annualized wages less the $16,100 standard deduction (the build checks this against two published rows of the table). Each step of the waterfall changes one input and recomputes the whole check, and the build fails if the steps stop adding up to the difference. The "room left" figures come from the 401(k) catch-up calculator.

• IRS, Publication 15 (2027), draft of Oct 14, 2026: the 2027 Social Security wage base of $192,300, the 6.2% and 1.45% rates, Additional Medicare withholding above $200,000, the 22% and 37% supplemental rates, and the reminder to file a 2027 W-4. 2027.
• SSA, contribution and benefit base: $192,300 for 2027 and $184,500 for 2026.
• Rev. Proc. 2026-24: HSA limits of $4,500 and $9,000. 2027.
• IRS, Publication 15-T (2026): Worksheet 1A and the percentage method tables used for both checks. 2026.
• Rev. Proc. 2025-32: 2026 brackets, the $16,100 standard deduction and the $3,400 health FSA limit. 2026.
• Rev. Proc. 2025-19: 2026 HSA limits. IR-2025-111: the 2026 401(k) limit of $24,500. 2026.
• 26 U.S.C. §3101(b)(2) and §3102(f): the Additional Medicare Tax and its withholding. §129: the $7,500 dependent care limit.

Open this scenario in the calculator

Figures on this page come from DecisionSheet's 2026 tax tables (IRS Rev. Proc. 2025-32 and Pub. 15-T), the 2027 Social Security wage base and HSA limits already published (SSA; Rev. Proc. 2026-24), and the 401(k) Catch-Up & Max-Out calculator.