How to Read Your Paycheck Stub: Every Line Explained
Understand every line on your paycheck stub including federal tax, state tax, FICA, deductions, and net pay. Learn what you're being charged and how to verify accuracy.
Gross Pay vs. Net Pay
Your paycheck stub starts with gross pay — the total amount you earned before any deductions. For salaried employees, this is your annual salary divided by the number of pay periods (26 for biweekly, 24 for semi-monthly, 12 for monthly). For hourly workers, it's hours worked multiplied by your hourly rate, plus any overtime (1.5× rate for hours over 40/week). Net pay (take-home pay) is what remains after all taxes and deductions are subtracted. The difference between gross and net often surprises new workers — expect to take home 65-80% of your gross pay depending on your tax bracket and benefits.
Federal and State Income Tax Withholding
Federal income tax is withheld based on your W-4 form selections (filing status, number of dependents, and any additional withholding you requested). The amount varies based on your income level and withholding elections — not a flat percentage. If you consistently owe taxes or receive large refunds at tax time, adjust your W-4. State income tax works similarly but varies by state — 9 states have no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming). Some cities also withhold local income tax. Use a paycheck calculator to verify your withholdings are correct.
FICA: Social Security and Medicare
FICA taxes are mandatory payroll taxes that fund Social Security and Medicare. You pay 6.2% of gross pay for Social Security (on earnings up to $168,600 in 2024) and 1.45% for Medicare (no income cap). Your employer matches these amounts, so the total FICA rate is 15.3%. An additional 0.9% Medicare surtax applies to earnings over $200,000. For a biweekly paycheck of $3,000 gross, FICA deductions are approximately $186 for Social Security and $43.50 for Medicare, totaling $229.50. Unlike income tax, FICA rates are flat — everyone pays the same percentage regardless of filing status.
Pre-Tax vs. Post-Tax Deductions
Pre-tax deductions reduce your taxable income, effectively giving you a tax break. Common pre-tax deductions: 401(k) or 403(b) contributions, health insurance premiums, HSA (Health Savings Account) contributions, FSA (Flexible Spending Account) contributions, and commuter benefits. Post-tax deductions are taken after taxes are calculated, so they don't reduce your tax bill. Common post-tax deductions: Roth 401(k) contributions, life insurance premiums above $50,000 in coverage, disability insurance, union dues, and wage garnishments. Understanding the distinction matters — $100 in pre-tax 401(k) contributions might only reduce your take-home by $70-80 because of the tax savings.
How to Verify Your Paycheck Is Correct
Payroll errors are more common than you'd think — studies suggest 1-8% of paychecks contain mistakes. Check these items each pay period: verify hours worked match your records (especially overtime), confirm your pay rate is correct, ensure tax withholdings match your W-4 elections, verify benefit deductions match your enrollment (especially after open enrollment changes), and check year-to-date totals against your expectations. If you find an error, report it to your HR or payroll department immediately. Employers are legally required to correct payroll mistakes, and in many states, they must issue corrections within a set timeframe.
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Frequently Asked Questions
Why is so much taken out of my paycheck?
A typical paycheck loses 20-35% to deductions: federal income tax (10-22% for most workers), state income tax (0-10%), Social Security (6.2%), Medicare (1.45%), and optional deductions like health insurance and retirement contributions. On a $60,000 salary, expect roughly $45,000-48,000 in take-home pay. Pre-tax benefits like 401(k) and health insurance reduce your tax bill, so choosing these benefits makes your effective deduction rate lower.
Should I adjust my W-4 if I got a big tax refund?
A large tax refund (over $1,000) means you're having too much withheld — you're essentially giving the government an interest-free loan. Update your W-4 to reduce withholding and increase your take-home pay. Conversely, if you owed taxes, increase withholding. The goal is to break even or receive a small refund ($200-500). Use the IRS Tax Withholding Estimator tool and a paycheck calculator to find the right settings.
What is the difference between salary and hourly on a paycheck?
Salaried employees receive a fixed amount per pay period regardless of hours worked (though exempt employees don't get overtime pay). Hourly employees are paid for actual hours worked and must receive 1.5× overtime pay for hours over 40 per week. Salaried paychecks are consistent and predictable; hourly paychecks vary. Both show the same types of deductions, but hourly stubs also detail regular hours, overtime hours, and any shift differentials.