Understanding Your Paystub
Your paystub contains a wealth of information about your earnings and deductions. Understanding each line item helps you verify accuracy, plan your budget, and make informed financial decisions.
Earnings Section
The top of your paystub shows what you earned this pay period and year-to-date (YTD).
| Line Item | What It Means |
|---|---|
| Regular Pay | Your base salary or hourly wages for standard hours worked |
| Overtime Pay | Hours worked beyond 40/week, typically paid at 1.5x your regular rate |
| Holiday Pay | Extra pay for working on company holidays |
| Bonus | Performance bonuses, signing bonuses, or incentive pay |
| Commission | Earnings based on sales or performance metrics |
| Gross Pay | Total of all earnings before any deductions |
Tax Deductions
Taxes are the largest deductions from most paychecks.
Federal Income Tax
Based on your W-4 filing status and allowances. Uses progressive tax brackets (10% to 37%). Your employer withholds an estimated amount each pay period.
State Income Tax
Varies by state (0% in states like TX, FL, WA; up to 13.3% in CA). Some cities also have local income taxes.
Social Security (OASDI)
6.2% of gross pay up to the wage base limit ($168,600 in 2024). Your employer pays a matching 6.2%.
Medicare
1.45% of all gross pay (no wage limit). Additional 0.9% on earnings over $200,000. Your employer matches the base 1.45%.
FICA Total
Social Security (6.2%) + Medicare (1.45%) = 7.65% of your gross pay goes to FICA taxes. Your employer pays an additional 7.65%, for a total of 15.3%.
Pre-Tax Deductions
These reduce your taxable income, saving you money on taxes:
- 401(k)/403(b) contributions — Your retirement savings (reduces taxable income)
- Health insurance premiums — Medical, dental, vision (usually pre-tax through Section 125)
- HSA contributions — Health Savings Account (triple tax-advantaged)
- FSA contributions — Flexible Spending Account for medical or dependent care
- Commuter benefits — Pre-tax transit or parking expenses
Post-Tax Deductions
These come out after taxes are calculated:
- Roth 401(k) — Retirement contributions with after-tax dollars
- Life insurance — Employer-provided amounts over $50,000
- Union dues — If applicable
- Garnishments — Court-ordered deductions (child support, student loans)
YTD Totals
Year-to-date totals show your cumulative earnings and deductions since January 1st. These are important for:
- Income verification — Lenders use YTD to project annual income
- Tax planning — Track how much tax you've paid
- 401(k) limits — Ensure you don't exceed annual contribution limits
- Social Security cap — Once you hit the wage base, SS withholding stops
Net Pay
The bottom line: what actually gets deposited into your bank account. Net Pay = Gross Pay - All Deductions.
Example: Bi-Weekly Paycheck on $60,000 Salary
| Gross Pay | $2,307.69 |
| Federal Tax | -$249.00 |
| State Tax (5%) | -$115.38 |
| Social Security | -$143.08 |
| Medicare | -$33.46 |
| Health Insurance | -$125.00 |
| 401(k) at 6% | -$138.46 |
| Net Pay | $1,503.31 |
Common Paystub Errors to Watch For
- Wrong filing status or withholding allowances
- Missing overtime or bonus payments
- Incorrect benefit deduction amounts
- Wrong pay rate after a raise
- Duplicate deductions
Review your paystub each pay period, especially after life changes (marriage, new baby, address change) or employment changes (raise, promotion, benefits enrollment).
Frequently Asked Questions
What is the difference between gross pay and net pay?
Gross pay is your total earnings before any deductions. Net pay is what you actually take home after taxes, insurance, retirement contributions, and other deductions.
What is FICA on my paystub?
FICA stands for Federal Insurance Contributions Act. It includes Social Security tax (6.2%) and Medicare tax (1.45%), totaling 7.65% of your gross pay.
Why is my paycheck less than my salary divided by pay periods?
Your salary is gross annual pay. Your paycheck reflects net pay after federal tax, state tax, FICA, insurance, retirement contributions, and other deductions.