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How to Read Your Paycheck

Every line on your pay stub explained in plain language. Know exactly where your money goes.

Anatomy of a Pay Stub

Your pay stub is a detailed record of how your gross pay is divided among taxes, deductions, and your take-home pay for each pay period. Understanding each line empowers you to verify accuracy, optimize your withholding, and plan your finances effectively. Most pay stubs contain four main sections: earnings, taxes, deductions, and net pay.

Errors on pay stubs are more common than you might think. Incorrect filing status, wrong state withholding, or missed pre-tax deductions can cost you hundreds of dollars per year. Reviewing your stub regularly ensures your employer is withholding the right amounts and applying your benefits correctly.

Earnings Section

The earnings section shows all compensation for the pay period:

  • Regular Pay / Salary: Your base compensation. For salaried employees, this is your annual salary divided by the number of pay periods. For hourly workers, it is hours worked multiplied by your hourly rate.
  • Overtime: Hours worked beyond 40 per week, paid at 1.5x your regular rate (2x in some states for certain thresholds).
  • Bonus / Commission: Additional compensation that may be taxed at a higher supplemental rate (22% federal flat rate for supplemental wages).
  • PTO / Holiday Pay: Paid time off and holiday pay, taxed the same as regular earnings.
  • Gross Pay: The total of all earnings before any deductions. This is the starting point for all tax calculations.

Taxes Section

The taxes section typically includes these withholdings:

  • Federal Income Tax (FIT): Based on your W-4 selections and the IRS withholding tables. This is an estimate of your annual federal tax liability divided across pay periods. Your actual tax is determined when you file your return.
  • State Income Tax (SIT): Varies by state. Nine states withhold nothing. Others range from under 1% to over 13%. See our state calculators for your rate.
  • Social Security (OASDI): 6.2% of gross wages up to $168,600. You will see this stop mid-year if your income exceeds the wage base.
  • Medicare (HI): 1.45% of all gross wages with no cap. An additional 0.9% applies to wages above $200,000.
  • Local/City Tax: Some cities and counties impose their own income taxes. Common in Ohio, Pennsylvania, Maryland, and New York City.

Deductions Section

Deductions are amounts subtracted from your pay for benefits, retirement, and other withholdings:

  • 401(k) / 403(b) / TSP: Pre-tax retirement contributions. These reduce your taxable income, lowering your federal and state tax withholding.
  • Roth 401(k): Post-tax retirement contributions. These do not reduce current taxes but grow tax-free.
  • Health Insurance: Your share of medical, dental, and vision premiums. Usually pre-tax under a Section 125 plan.
  • HSA: Health Savings Account contributions. Pre-tax, reducing both income tax and FICA.
  • FSA: Flexible Spending Account for healthcare or dependent care expenses. Pre-tax, use-it-or-lose-it.
  • Life / Disability Insurance: Employer-sponsored coverage premiums. May be pre-tax or post-tax depending on the plan.
  • Union Dues: If applicable, deducted post-tax.

Year-to-Date (YTD) Totals

Your pay stub should show cumulative year-to-date totals for earnings, taxes, and deductions. These YTD figures are important for several reasons:

  • Tracking Social Security: Once your YTD earnings exceed $168,600, Social Security withholding should stop. Verify this happens on the correct paycheck.
  • W-2 reconciliation: At year end, your YTD totals should match your W-2 form. Compare them to catch errors before tax season.
  • Retirement contribution limits: Ensure your 401(k) contributions do not exceed the annual limit ($23,500 for 2025).
  • Withholding accuracy: Compare YTD federal tax withheld to your expected annual liability. Use the take-home pay guide to estimate.

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