A pay stub summarizes your earnings and deductions for a pay period. Understanding it ensures you're being paid correctly, helps you understand your tax situation, and shows you exactly where your money goes before it hits your bank account.
Gross Pay
Gross pay is your total earnings before any deductions. For salaried employees, it's your annual salary divided by the number of pay periods. For hourly workers, it's hours worked multiplied by your hourly rate, plus any overtime (typically 1.5x for hours over 40/week in the US).
Federal Income Tax
Your employer withholds federal income tax based on your Form W-4 elections (filing status, dependents, extra withholding). This amount goes to the IRS and is reconciled when you file your tax return. Withholding too little means you'll owe at filing; too much means a refund.
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 cap
- Additional Medicare: 0.9% on wages above $200,000 (employee only)
- Your employer matches your Social Security and Medicare contributions
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. Some cities also levy a local income tax.
Pre-Tax Deductions
These reduce your taxable income and include contributions to 401(k) or 403(b) retirement plans, health insurance premiums (if employer-sponsored), dental and vision insurance, FSA (Flexible Spending Account), and HSA (Health Savings Account). Pre-tax deductions are subtracted before income taxes are calculated.
Net Pay
Net pay — your take-home pay — is what remains after all deductions. Formula: Gross Pay − Pre-Tax Deductions − Taxes − Post-Tax Deductions = Net Pay. Year-to-date (YTD) totals show cumulative earnings and deductions from January 1 through the current pay period.
If your net pay seems lower than expected, check your pre-tax deductions first. Enrollment in benefits you didn't intend to select is a common payroll error.
