How to Read a Pay Stub: Every Deduction Decoded

Most employees glance at the net pay number, confirm the direct deposit landed, and move on. The rest of the pay stub — that wall of abbreviations, percentages, and current-period versus year-to-date columns — gets ignored. That's understandable. It's dense. But understanding every line serves you in three concrete ways: you can verify that the numbers are actually correct (errors happen more than people realize), you can make smarter decisions about your W-4 withholding, and you can see exactly what your total compensation package costs your employer versus what ends up in your pocket. Here's every line item on a typical American pay stub, explained in plain English.

Key Takeaways

Gross pay is your starting number before any taxes or deductions — it's what you actually earned this period.
FICA taxes are non-negotiable: Social Security at 6.2% (up to the annual wage base) and Medicare at 1.45% on all wages, with your employer matching both.
Federal income tax withholding is not a fixed rate — it's calculated from IRS tables based on your W-4 elections, and it's the one withholding you have real control over.
Pre-tax deductions — 401(k), health insurance, HSA, FSA — reduce your federally taxable income before the IRS takes its cut, making them worth more than their face value.
YTD (year-to-date) columns show running totals that help you verify accuracy and track where you stand on contribution limits and the Social Security wage cap.
Net pay = gross pay minus all taxes and deductions. Every other line on the stub explains how you get from gross to net.

Gross Pay: The Starting Number

Gross pay is what you earned before anything is withheld — it's the true measure of your compensation for the period. How it's calculated depends on how you're paid:

Salaried employees: Annual salary ÷ number of pay periods. A $78,000 salary on a biweekly schedule (26 pay periods) means $78,000 ÷ 26 = $3,000 gross per paycheck.
Hourly employees: Regular hours × hourly rate, plus any overtime. Federal law (and most state laws) require overtime at 1.5× for hours over 40 in a workweek, though your stub may show regular and OT hours separately.
Bonuses and commissions: These are "supplemental wages" and are listed separately. They're taxed differently — the IRS allows a flat 22% federal withholding rate for supplemental wages under $1 million, though your employer may use a different method.

Your stub will typically show a YTD gross pay figure as well. This running total is important — it's the number that determines when you hit the Social Security wage cap each year.

FICA Taxes: Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act, and these two taxes fund Social Security and Medicare. They're not optional, they're not adjustable through your W-4, and they apply to essentially every employee in the country.

Social Security (labeled "OASDI" or "SS" on your stub): The rate is exactly 6.2% of your gross wages, but only up to the annual wage base. For 2026, that cap is $176,100. Once your YTD earnings exceed that threshold, Social Security withholding stops for the rest of the year. If you earn over $176,100, you'll notice your net pay get a small bump once you cross that line mid-year.

Medicare (labeled "MED" or "Medicare"): The rate is 1.45% on all wages with no wage base cap — unlike Social Security, it never stops. High earners face an additional 0.9% Additional Medicare Tax on wages above $200,000 (single filers) or $250,000 (married filing jointly). Your employer withholds the extra 0.9% once your wages cross $200,000, regardless of your filing status — any true-up happens on your tax return.

Importantly, your employer matches both the 6.2% Social Security and 1.45% Medicare contributions out of their own pocket. You pay 6.2% + 1.45% = 7.65%; so does your employer. This is why your total employment cost to your employer is meaningfully higher than your gross salary — and why self-employed individuals pay 15.3% (both halves) in self-employment tax.

Federal Income Tax Withholding

The federal income tax line is often the largest deduction on your stub, and it's also the most misunderstood. Unlike FICA, which is a fixed percentage, federal income tax withholding is not a flat rate applied to your gross pay. It's calculated using IRS withholding tables that factor in:

Your gross wages for the period
Your pay frequency (weekly, biweekly, semi-monthly, monthly)
Your filing status (single, married filing jointly, head of household)
Your W-4 elections, including any additional withholding amounts you requested

This is the deduction you have the most control over. If you consistently get a large refund, you're over-withholding — giving the government an interest-free loan. If you consistently owe at filing time, you're under-withholding. Both situations are fixable by filing an updated W-4 with your employer. The IRS Tax Withholding Estimator (available at irs.gov) and our W-4 Calculator can help you dial in the right amount.

Note that federal withholding is calculated before most pre-tax deductions are applied. So if you contribute $500 to your 401(k) this period, the IRS calculates withholding on your gross pay minus that $500 — which is one of the key benefits of pre-tax accounts.

State and Local Taxes

State income tax withholding works similarly to federal — it's calculated from your state's withholding tables based on your gross wages (after pre-tax deductions) and your state withholding form elections. Rates vary enormously by state, from 0% to over 13%.

Nine states currently have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, this line simply won't appear on your stub.

Beyond state tax, some localities add their own income taxes. New York City residents pay a city income tax on top of New York State tax. Philadelphia, Detroit, and several other cities have local wage taxes. If you live or work in a city with a local income tax, you'll see an additional line on your stub — sometimes labeled "City Tax," "Local Tax," or with the city's specific abbreviation.

Some states also withhold for State Disability Insurance (SDI) or State Unemployment Insurance (SUI) from employee paychecks. California (SDI), New Jersey, New York, Hawaii, and Rhode Island are common examples. These appear as separate line items with small fixed percentages.

Pre-Tax Deductions (They Reduce Your Taxable Income)

This section is where smart financial decisions show up on your pay stub. Pre-tax deductions come out of your gross pay before federal (and usually state) income taxes are calculated, which means every dollar contributed saves you money in taxes right now.

Traditional 401(k) / 403(b) contributions: The biggest pre-tax benefit for most employees. Contributions reduce your federal taxable income dollar-for-dollar. The 2026 employee contribution limit is $23,500 (plus a $7,500 catch-up if you're 50 or older). Your stub shows the current-period contribution and the YTD total — watch the YTD figure as you approach the annual limit.
Health insurance premiums: If your employer offers health insurance through a Section 125 cafeteria plan (which most do), your share of the premium comes out pre-tax. This means a $300/month premium doesn't actually cost you $300 in after-tax dollars — it costs you $300 minus your marginal tax rate's worth of savings.
Health Savings Account (HSA) contributions: For employees enrolled in a High Deductible Health Plan (HDHP), HSA contributions made through payroll avoid federal income tax, state income tax (in most states), and FICA taxes — making them the most tax-advantaged savings vehicle available to most people.
Flexible Spending Account (FSA) contributions: Similar to HSA but use-it-or-lose-it (with limited rollover). Covers medical expenses or dependent care depending on account type.
Commuter benefits: Pre-tax contributions for transit passes or qualified parking, up to IRS monthly limits.

The combined tax savings from pre-tax deductions can be substantial. An employee in the 22% federal bracket contributing $500/month to a 401(k) saves roughly $110/month in federal taxes alone — the actual out-of-pocket cost of the contribution is $390, not $500.

Post-Tax Deductions

Post-tax deductions come out after all taxes are calculated and paid. They reduce your net pay but do not reduce your taxable income. Common examples:

Roth 401(k) contributions: You pay taxes now, but qualified withdrawals in retirement are completely tax-free. Roth contributions share the same annual limit as traditional 401(k) contributions ($23,500 combined for 2026). Many employees split contributions between traditional and Roth — the right mix depends on whether you expect to be in a higher or lower tax bracket in retirement.
Employer-sponsored life insurance above $50,000: The IRS treats the premium value of employer-provided life insurance over $50,000 as imputed income — meaning it gets added to your taxable income and taxed, even though you never receive that money in cash. You'll see this as a small addition on your stub labeled "GTL" (Group Term Life) or similar.
Garnishments: Court-ordered wage garnishments for child support, student loans, or creditor judgments are post-tax deductions. They're non-negotiable and have federally mandated limits on how much can be withheld per paycheck.
Voluntary supplemental benefits: Supplemental life insurance, disability insurance, or other voluntary benefits not offered as pre-tax options.

How to Verify Your Pay Stub Is Correct

Payroll errors happen — miscoded deductions, wrong pay rates, benefits elections that didn't process correctly. Most employees would never notice because they don't check. Here's a quick verification routine:

Verify your personal information. Confirm your name, address, and the last four digits of your Social Security number are correct. SSN errors can cause problems at tax time.
Confirm gross pay matches your agreement. If you're salaried, divide your annual salary by your pay periods and compare to the gross shown. If you're hourly, multiply your hours by your rate and add any overtime.
Spot-check the FICA percentages. Social Security should be exactly 6.2% of your gross (or $0 if you've hit the wage base). Medicare should be exactly 1.45%. Grab a calculator and verify.
Check YTD totals match. Your current-period amounts multiplied by the number of pay periods completed should roughly match the YTD column. Significant discrepancies (outside of raises, bonuses, or benefit changes) warrant a question to payroll.
Verify pre-tax deductions match your elections. If you elected a $400/paycheck 401(k) contribution during open enrollment, confirm that's what's being deducted. Enrollment system errors that result in no contributions are more common than you'd think, and you can't recover lost employer match for prior periods.

Important: If you find an error, contact your payroll department in writing (email creates a paper trail) as soon as possible. Most payroll systems correct errors in future pay periods, though significant errors may qualify for an off-cycle correction.

Use the QuickUtil Take-Home Pay Calculator

The best way to understand what your pay stub should look like before you even receive it — or to model the impact of changing your 401(k) contribution, adjusting your W-4, or switching to a different health plan — is to run the numbers yourself. The Take-Home Pay Calculator lets you enter your gross salary, filing status, state, and pre-tax deductions to see a full estimated breakdown of every withholding and deduction. You can also use the Income Tax Estimator to project your annual federal and state tax liability, and the W-4 Calculator to determine whether you should adjust your withholding to avoid a surprise bill or stop over-withholding for the IRS.

Your pay stub is a financial document worth understanding. Once you know what every line means, you stop being a passive observer of your own paycheck and start having real control over how much of your money you keep.