A pay stub summarizes your earnings and deductions for a pay period. Understanding every line ensures you are being paid correctly, helps you grasp your tax situation, and shows exactly where your money goes before it reaches your bank account. Payroll errors are more common than most employees realize — surveys suggest that roughly 1 in 3 employees has experienced a pay error at some point in their career.
Pay Frequencies Explained
How often you are paid determines how many paychecks you receive per year and how much appears on each stub. Weekly pay (52 paychecks/year) is common in manufacturing and hourly work. Bi-weekly (every two weeks, 26 paychecks/year) is the most common schedule in the US. Semi-monthly (twice per month, 24 paychecks/year — typically the 1st and 15th) is common in salaried office settings. Monthly (12 paychecks/year) is less common but used by some employers and governments. To convert an annual salary to per-paycheck gross pay, divide by the number of pay periods: $60,000 ÷ 26 = $2,307.69 bi-weekly.
Gross Pay
Gross pay is your total earnings before any deductions are taken. For salaried employees, it is your annual salary divided by the number of pay periods per year. For hourly workers, gross pay equals regular hours worked multiplied by your hourly rate, plus overtime. Under the federal Fair Labor Standards Act (FLSA), most non-exempt hourly employees must receive 1.5x their regular rate for any hours worked beyond 40 in a workweek. Some states — like California — have daily overtime rules as well, requiring 1.5x for hours beyond 8 in a single day.
Federal Income Tax Withholding and Your W-4
Your employer withholds federal income tax based on your Form W-4, which you complete when you start a job or when your situation changes. The 2020 redesign of the W-4 replaced personal exemptions with a simpler system based on filing status, multiple jobs, dependents, and additional withholding amounts. Withholding too little means you will owe money (and potentially a penalty) at tax time. Withholding too much means a refund — which sounds nice but is actually an interest-free loan to the government. Use the IRS Tax Withholding Estimator tool annually to check your settings.
FICA Taxes
- Social Security tax: 6.2% of gross pay up to the annual wage base ($168,600 in 2024)
- Medicare tax: 1.45% of all gross pay with no upper cap
- Additional Medicare: 0.9% on wages above $200,000 (employee only, not matched by employer)
- Your employer matches your Social Security (6.2%) and Medicare (1.45%) contributions
- Self-employed individuals pay both halves — 15.3% total — via self-employment tax
State and Local Taxes
Most US states have their own income tax withheld separately from federal tax. Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. New Hampshire taxes only investment income, not wages. Some cities levy their own local income tax — New York City, Philadelphia, and many Ohio cities are notable examples. If you work remotely and live in a different state than your employer, your withholding situation can be complex; consult a tax professional to ensure the correct state is withholding.
Pre-Tax Deductions
Pre-tax deductions reduce your taxable wages before income taxes are calculated, effectively making them tax-free contributions. Common pre-tax deductions include 401(k) or 403(b) retirement plan contributions, health insurance premiums under employer-sponsored plans, dental and vision insurance, FSA (Flexible Spending Account) contributions, HSA (Health Savings Account) contributions, and commuter benefits. A $500/month 401(k) contribution from someone in the 22% tax bracket saves $110 in federal taxes alone each month — one of the most powerful immediate returns in personal finance.
Post-Tax Deductions
Post-tax deductions are taken after all taxes have been calculated and do not reduce your taxable income. They include Roth 401(k) contributions (after-tax now, tax-free at withdrawal), life insurance premiums above $50,000 of coverage, disability insurance in some cases, union dues, charitable payroll deductions, and garnishments. Imputed income — such as employer-paid life insurance above $50,000 or the value of domestic partner health coverage — is added to your taxable wages even though you never receive that money as cash.
Garnishments and Court-Ordered Deductions
A wage garnishment is a court-ordered deduction requiring your employer to withhold a portion of your earnings to pay a creditor — most commonly for child support, student loans in default, unpaid taxes, or consumer debt judgments. Federal law limits garnishments to 25% of disposable earnings (or the amount by which disposable earnings exceed 30 times the federal minimum wage, whichever is less). Child support garnishments can reach 50–65% of disposable earnings. Your employer is legally required to honor garnishment orders and cannot fire you solely because of a single garnishment.
Net Pay and Year-to-Date Totals
Net pay — your take-home pay — is what remains after all deductions. The formula is: Gross Pay minus Pre-Tax Deductions minus Taxes minus Post-Tax Deductions equals Net Pay. Year-to-date (YTD) totals track every earnings and deduction category cumulatively from January 1 through the current pay period. YTD totals are important for verifying that you have not exceeded contribution limits on retirement accounts or FSAs, and that Social Security withholding stops correctly once you hit the annual wage base.
Supplemental Wages: Bonuses and Commissions
Bonus, commission, and other supplemental wages are taxed differently from regular wages. Employers typically withhold federal income tax on supplemental pay at a flat 22% supplemental rate (for amounts under $1 million), regardless of your actual marginal tax bracket. This can result in over- or under-withholding depending on your total annual income. Social Security and Medicare taxes still apply normally. Your actual tax liability on the bonus is reconciled when you file your annual return — so a large bonus withheld at 22% may result in a refund if your effective rate is lower, or additional taxes owed if your effective rate is higher.
Your W-2 vs Your Final Pay Stub
Your W-2 form (received by January 31 each year) summarizes your annual earnings and withholdings for tax filing purposes. It should closely match your final pay stub of the year, but not always exactly. W-2 Box 1 (federal taxable wages) will be lower than your YTD gross pay if you made pre-tax 401(k) or health insurance contributions, because those reduce taxable wages. Your W-2 Box 3 (Social Security wages) may differ from Box 1 because it excludes some deductions that are not exempt from FICA. Compare your W-2 to your December pay stub to catch any discrepancies before filing.
Common Pay Stub Errors to Watch For
- Wrong hourly rate or salary amount — check against your offer letter or last raise
- Missing overtime pay for hours worked over 40 per week
- Incorrect benefit deductions — double-check after open enrollment
- 401(k) contributions not appearing or wrong amount withheld
- FICA taxes continuing after hitting the Social Security wage base
- State taxes withheld for the wrong state — especially for remote workers
- Unauthorized deductions that you did not authorize
If you believe your pay stub contains an error, bring it to your HR or payroll department with documentation — your offer letter, benefits enrollment confirmation, or time records. Payroll must correct errors, and in most states, unpaid wages carry legal consequences for employers. Keep digital copies of every pay stub in case you need them for loan applications, tax audits, or disputes.
