How to Read Your Paycheck Stub

If you have ever looked at your paycheck and wondered why the amount deposited in your bank account is so much less than your salary suggests, you are not alone. The gap between what you earn and what you take home is filled with federal taxes, state taxes, Social Security, Medicare, and various deductions. Understanding each line on your pay stub puts you in control of your finances and helps you spot errors that could cost you money.

Gross Pay: Where It All Starts

Gross pay is the total amount you earned before any taxes or deductions are taken out. For salaried employees, this is typically your annual salary divided by the number of pay periods in the year. For hourly workers, it is your hourly rate multiplied by the number of hours worked during the pay period.

Your pay stub will usually show both the gross pay for the current pay period and the year-to-date (YTD) total. The YTD column is useful for tracking how much you have earned so far in the calendar year and for verifying that your W-2 matches up at tax time.

If you earned overtime, bonuses, commissions, or tips during the pay period, these amounts are typically listed as separate line items but are added into your total gross pay. Overtime is generally paid at 1.5 times your regular hourly rate for hours worked beyond 40 in a workweek under the Fair Labor Standards Act.

Federal Income Tax Withholding

Federal income tax is usually the largest deduction on your pay stub. The amount withheld depends on several factors:

Your filing status (single, married filing jointly, head of household)
The number of allowances or adjustments on your W-4 form
Any additional withholding you requested on your W-4
Your income level and the current tax bracket thresholds

Your employer uses IRS Publication 15-T (the withholding tables) to calculate the correct amount to withhold each pay period. If you recently changed jobs, got married, or had a child, updating your W-4 can help ensure the right amount is withheld. Too little withholding means a tax bill in April; too much means you gave the government an interest-free loan. Check our 2025 tax bracket guide to see which bracket your income falls into.

FICA Taxes: Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act, and it funds two programs: Social Security and Medicare. These are separate from income tax and are calculated as a flat percentage of your gross pay.

Social Security (OASDI): 6.2% of your gross pay, up to the wage base limit of $176,100 for 2025. Once your YTD earnings exceed this threshold, Social Security tax stops being withheld for the rest of the year. Your employer pays a matching 6.2%.
Medicare (HI): 1.45% of all gross pay with no income cap. Your employer also pays 1.45%. If you earn more than $200,000 as a single filer ($250,000 married filing jointly), an additional 0.9% Medicare surtax applies to earnings above that threshold. This extra tax is only paid by the employee, not matched by the employer.

Combined, FICA takes 7.65% of your pay (up to the Social Security cap), which is why it often rivals federal income tax as the biggest bite out of your paycheck.

State and Local Income Tax

Depending on where you live and work, your pay stub may show state income tax withholding, and sometimes local or city income tax as well. The amount varies widely:

No state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax wage income.
Flat-rate states: States like Illinois (4.95%), Pennsylvania (3.07%), and Indiana charge the same percentage regardless of income.
Progressive states: States like California (1% to 13.3%) and New York (4% to 10.9%) have multiple brackets similar to the federal system.

Some cities impose their own income taxes on top of state tax. For example, New York City residents pay an additional 3.08% to 3.876%. If you work in one state but live in another, reciprocity agreements may affect which state taxes your income.

Pre-Tax Deductions

Pre-tax deductions are subtracted from your gross pay before taxes are calculated, which reduces your taxable income and lowers the total taxes you owe. Common pre-tax deductions include:

401(k) or 403(b) contributions: Traditional retirement plan contributions are deducted pre-tax. If you contribute $500 per paycheck to your 401(k), your taxable income for that pay period drops by $500. Learn about retirement account options in our 401(k) vs IRA guide.
Health insurance premiums: If your employer offers group health, dental, or vision insurance, your share of the premium is usually deducted pre-tax through a Section 125 cafeteria plan.
Health Savings Account (HSA): If you have a high-deductible health plan, HSA contributions are deducted pre-tax and grow tax-free when used for qualified medical expenses.
Flexible Spending Account (FSA): Both healthcare and dependent care FSAs allow pre-tax contributions for eligible expenses.
Commuter benefits: Transit passes and parking expenses can be deducted pre-tax up to IRS limits.

Post-Tax Deductions

Post-tax deductions are taken out after taxes have been calculated, so they do not reduce your tax burden. These may include:

Roth 401(k) contributions: Unlike traditional 401(k) contributions, Roth contributions are made with after-tax dollars. You pay tax now but withdraw tax-free in retirement.
Life insurance (employer-paid above $50,000): The IRS requires you to pay tax on the value of employer-provided group life insurance coverage exceeding $50,000.
Wage garnishments: Court-ordered deductions for child support, student loans in default, or unpaid taxes.
Union dues: Membership fees for labor unions are deducted post-tax.

Net Pay: Your Take-Home Amount

Net pay is the final amount deposited into your bank account or printed on your check. It is calculated as:

Net Pay = Gross Pay - Pre-Tax Deductions - Federal Tax - FICA - State/Local Tax - Post-Tax Deductions

For a typical single filer earning $60,000 per year paid biweekly, a single paycheck might break down roughly as follows: gross pay of $2,307.69, minus about $325 in federal tax, $176 in FICA, $100 in state tax, and $200 in 401(k) contributions, leaving a net pay of around $1,507. That is roughly 65% of gross pay — a common ratio for middle-income earners.

Common Pay Stub Errors to Watch For

Payroll mistakes happen more often than you might think. Review your pay stub regularly and watch for these issues:

Incorrect hours or overtime calculations for hourly workers
Wrong filing status or outdated W-4 information affecting withholding
Missing or doubled pre-tax deductions (especially after open enrollment changes)
Social Security tax still being withheld after you have exceeded the wage base
State tax withholding for the wrong state if you recently moved

If you spot an error, contact your payroll or HR department immediately. Most issues can be corrected in the next pay cycle, and over-withheld taxes will be reconciled when you file your return.

Calculate Your Exact Take-Home Pay

Want to see exactly how every dollar of your paycheck breaks down? Our free paycheck calculator computes your federal tax, FICA, state tax, and deductions for all 50 states. Enter your salary, filing status, and deductions to get a detailed breakdown of your take-home pay for any pay frequency.