How to Read Your Pay Stub: Taxes, Deductions and Withholding Explained
Your pay stub explains why your take-home pay differs from your salary. Learn what each line means, how withholding works and what to check for errors.
Key takeaways
- Gross pay is earnings before taxes and deductions; net pay is the amount paid to you.
- Federal income tax withholding is an estimate paid toward your tax bill, not your final tax calculation.
- FICA usually covers Social Security and Medicare, while state and local taxes depend on where you work and live.
- Pre-tax and post-tax deductions affect your taxable wages differently, so check the plan and tax treatment.
- Compare each stub with your hours, pay rate, benefits elections and year-to-date totals to spot mistakes.
In this guide
A pay stub can look like a wall of abbreviations, especially when your take-home pay is less than the salary or hourly earnings you expected. It is worth learning the basics: the stub shows how your employer calculated your pay and what was withheld or deducted before the money reached your account.
This guide explains gross and net pay, federal and payroll taxes, benefit deductions, year-to-date figures and a practical way to check for errors. Your exact lines will vary by employer, state and benefit plan, but the same core checks apply.
Start with gross pay and net pay
Gross pay is your earnings before taxes and deductions. Net pay, often called take-home pay, is what remains after items are subtracted. If you receive direct deposit, net pay should generally match the deposit or deposits sent for that pay period, though a stub may also show separate allocations to multiple accounts.
First, check the pay-period dates and pay date. Then compare the pay rate, hours or salary, and gross amount with your offer letter, time records and any approved changes. A salary paid every two weeks, for example, is usually divided across 26 pay periods, while a semimonthly schedule usually has 24. Do not assume every employer uses the same schedule.
A pay stub may also show several versions of taxable wages. They can differ from gross pay because some benefits or contributions receive different tax treatment. Use the wages listed for each tax calculation rather than assuming the gross-pay figure is the amount every tax applies to.
Good to know: A change in net pay does not always mean your pay rate changed. A new benefit election, a change in tax withholding, unpaid time off or a one-time payment can affect the amount deposited.
Check the earnings section
The earnings area lists the pay included in that check. Depending on your job, it may separate regular hours from overtime, commission, bonuses, tips, paid leave, shift differentials or reimbursements. Confirm that the listed hours and rates match the work and approved time off for that period.
For hourly workers, check that overtime hours and rates appear as expected under the applicable rules and workplace policy. Overtime requirements can depend on job duties and other factors, so a job title alone does not determine whether a worker qualifies. If you are unsure about your rights, consult your employer’s payroll or human resources team, or the U.S. Department of Labor for general information.
For salaried workers, look for adjustments such as unpaid leave, a partial first or last pay period, or a bonus. Reimbursements may be listed separately from wages, and their tax treatment can depend on how the payment was handled. If a line is unclear, ask payroll what it represents and how it was calculated.
| Pay-stub figure | What it generally means | What to check |
|---|---|---|
| Gross pay | Earnings before deductions | Hours, rate, salary and extra pay |
| Federal taxable wages | Wages used to calculate federal income tax withholding | Whether eligible pre-tax items are excluded |
| Social Security and Medicare wages | Wages used for FICA calculations | Whether the amounts make sense alongside gross pay and benefits |
| Net pay | Amount left after applicable taxes and deductions | Whether it matches your direct deposit or check |
Understand federal income tax withholding
Federal income tax withholding is money your employer sends to the government from your paycheck based largely on the information you provide on Form W-4 and your pay. It is a prepayment toward your federal income tax bill, not a final determination of how much tax you owe for the year. Your final tax calculation depends on your full-year income, filing status, credits, deductions and other circumstances.
When you start a job or your circumstances change, review your W-4. It includes information such as filing status and adjustments that can affect withholding. A W-4 is not the same as your tax return. You can use the IRS Tax Withholding Estimator or speak with a qualified tax professional if you need help deciding whether to update it.
If too little is withheld over the year, you may owe when you file and could face an underpayment penalty in some situations. If too much is withheld, you may receive a refund, but that also means you had less take-home pay during the year. A large change in withholding can be intentional, but check with payroll if it does not match a W-4 change you made.
Pro tip: When you change your W-4, keep a copy and check the next pay stub to confirm the change took effect. Payroll processing cutoffs can mean it does not appear on the very next check.
Identify FICA, state and local taxes
FICA is the federal payroll tax that funds Social Security and Medicare. Your stub may list these as separate deductions, such as Social Security, OASDI, Medicare or HI. The amounts are generally calculated from wages subject to those taxes, which may not be identical to federal income tax wages.
Social Security tax applies to earnings up to an annual wage limit that can change. Medicare tax generally applies to covered wages without that same general cap, and additional Medicare withholding may apply to some higher wages. If you work for more than one employer in a year, the combined Social Security withholding can sometimes exceed the annual limit; the rules for correcting or claiming an excess depend on your situation. Check current IRS guidance for the applicable limits and rules rather than relying on an old pay stub or a prior-year figure.
State income tax withholding depends on state law. Some states do not impose a broad wage income tax, while others do. Local income or wage taxes may apply in certain cities, counties or school districts. Your residence and work location can both matter, particularly if you work across state lines or remotely.
Compare the state and local tax lines with where you live and work, and check whether your employer has the right address and tax elections on file. If you recently moved, changed work locations or started working remotely from another state, ask payroll how the change was recorded. For a complicated multistate situation, a tax professional can explain how withholding and filing obligations may apply.
Sort out pre-tax and post-tax deductions
Deductions are not all taxes. Some pay for benefits you selected, some are required by law or a court order, and others are contributions to savings plans. The labels and tax treatment depend on the employer’s plan and applicable rules.
A pre-tax deduction is taken out before certain taxes are calculated. A traditional 401(k) contribution generally reduces wages subject to federal income tax, but it usually does not reduce wages subject to Social Security and Medicare taxes. State treatment can differ. A Roth 401(k) contribution is generally made after income tax, so it does not reduce federal taxable wages in the same way.
Health insurance premiums may be deducted before taxes when the employer plan and applicable rules allow it. HSA contributions made through payroll may also receive favorable tax treatment when the account and contribution qualify. An HSA is not the same as a health care flexible spending account, and eligibility rules apply. Check current IRS guidance for contribution limits and eligibility rather than using an outdated number.
Post-tax deductions come out after the relevant taxes are calculated. Examples can include Roth retirement contributions, some insurance premiums, union dues, charitable contributions or certain wage garnishments. Which items appear depends on your job and elections. A garnishment or other legal deduction should have an explanation or documentation, so ask payroll if you do not understand its basis.
| Item | Common treatment | Useful check |
|---|---|---|
| Traditional 401(k) contribution | Often pre-tax for federal income tax, usually still subject to FICA | Confirm the contribution percentage and account type |
| Roth 401(k) contribution | Generally post-tax for income tax purposes | Check that the stub identifies the Roth contribution correctly |
| Health insurance premium | May be pre-tax if the plan allows | Compare the amount with your current benefit election |
| HSA payroll contribution | May be pre-tax when eligibility and plan rules are met | Confirm your eligibility and elected amount |
| Garnishment | Usually a required deduction after applicable taxes | Ask for the order or notice details if unclear |
The right way to review a deduction is to compare it with your enrollment confirmation, plan documents or other written authorization. If you are planning your monthly spending around a new job or a pay change, use net pay rather than gross salary. The 50/30/20 Budget: How to Make It Work on a Real Paycheck can help you organize take-home income after these items are accounted for.
Use year-to-date figures as a second check
Year-to-date, or YTD, totals show amounts accumulated from the beginning of the calendar year through the current pay period. A stub may list YTD gross wages, taxable wages, federal and state withholding, FICA taxes, retirement contributions and benefit deductions. These figures help you track progress, but they do not necessarily equal your final tax forms until all payroll corrections and year-end adjustments are complete.
Compare current-period and YTD columns when something changes. If a deduction appears for the first time, the YTD total can help you see how much has been taken so far. If you changed your contribution election, compare the new per-check amount with the earlier amount and confirm the effective date.
Keep pay stubs, especially when you change jobs, move, change benefits or need to resolve a discrepancy. Store them securely because they contain sensitive personal and financial information. You can also compare annual totals with your Form W-2 when it arrives, keeping in mind that some boxes report different wage and tax categories.
A step-by-step check for payroll errors
Take a few minutes to review each new stub, especially after a change in hours, pay rate, benefits, tax form or work location. Use this checklist:
- Verify the dates and pay frequency. Make sure the stub covers the correct work period and that the pay date is expected.
- Check earnings. Compare hours, rates, salary, overtime, paid leave, commissions and bonuses with your records.
- Compare deductions with your choices. Check retirement percentages, insurance premiums, HSA contributions and other elections against your confirmation documents.
- Review tax lines. Confirm the federal, state and local withholding reflects the information you supplied and the locations on file.
- Compare net pay with the deposit. Account for any split direct deposit or other payment arrangement shown on the stub.
- Save the record and note questions. Keep a dated copy and write down which line, period or calculation you are asking about.
If you find a possible error, contact payroll promptly and provide the pay period, the line item and the amount you believe is wrong. Keep the response and any corrected stub. If the issue concerns unpaid wages or overtime and you cannot resolve it with your employer, you can seek guidance from the U.S. Department of Labor or the relevant state labor agency. For a tax question about your personal filing, consult a qualified tax professional.
Safety note: Do not send a full pay stub through an unverified email or message. It can include your address, employee details and partial account information. Use your employer’s approved secure system and share only what is needed.
Common mistakes to avoid
- Treating gross pay as spendable income. Budget from net pay, since taxes, benefits and other deductions reduce the deposit.
- Assuming withholding equals your final tax bill. Withholding is a prepayment. Your tax return reconciles what was paid with what you owe under the tax rules.
- Assuming every pre-tax item avoids every tax. Different deductions can affect federal income tax, FICA and state taxes differently.
- Ignoring a changed deduction. Benefit costs, retirement elections and other authorized items can change. Confirm the reason rather than assuming the amount is correct.
- Using an old tax limit or rate. Rules and thresholds can change. Check current IRS and state tax agency information when a specific figure matters.
- Waiting until tax season to flag a pay error. Raise discrepancies with payroll as soon as you notice them, and keep records of the issue and response.
Pay changes can also be useful information when you are reviewing compensation. If your salary or hourly rate seems wrong, compare the stub with your written offer or latest pay-change notice before discussing it with your manager. For a broader conversation about compensation, see How to Negotiate a Raise: A Step-by-Step Plan With Scripts.
The Bottom Line
A pay stub breaks your earnings into gross pay, taxable wages, taxes, deductions and net pay. Check your hours and rate, understand what each withholding or benefit line represents, and use YTD totals to spot changes over time.
When something does not match your records, ask payroll for an explanation and keep the documentation. For questions about your tax liability or a complicated state, benefit or wage issue, get help from a qualified tax professional or the appropriate government agency.
Frequently asked questions
What is the difference between gross pay and net pay?
Gross pay is your earnings before taxes and deductions. Net pay is what remains after applicable taxes and deductions, and it is generally the amount sent to you.
Why is my federal tax withholding different from the tax I owe?
Federal withholding is an estimated prepayment based on your pay and Form W-4 information. Your final tax depends on your full-year income, filing situation, credits and other factors, and is calculated when you file.
Do 401(k) contributions reduce Social Security and Medicare taxes?
Traditional 401(k) contributions generally reduce wages subject to federal income tax, but usually do not reduce wages subject to Social Security and Medicare taxes. Roth contributions are generally made after income tax, and state treatment can vary.
What should I do if my pay stub is wrong?
Contact your employer’s payroll team promptly with the pay period, disputed line and supporting records. Save the response and any corrected stub, and seek guidance from the relevant labor agency if a wage issue remains unresolved.
Why are my taxable wages lower than my gross pay?
Some eligible benefits or retirement contributions may reduce wages used for particular tax calculations. The rules differ by deduction and by tax, so compare each taxable-wage figure with the deductions shown on your stub.
