How to Read a Pay Stub: Every Line Explained in Plain English
Your pay stub has 20 lines and you only understand your net pay. Here is what every deduction, tax, and line item actually means.
Gross Pay vs Net Pay
Gross pay is your total earnings before any deductions. It is the number your salary or hourly rate calculates to. Net pay is what you actually take home after all deductions. The difference between gross and net is where people get confused. On average, Americans take home about 70 to 75 percent of their gross pay. The rest goes to taxes, insurance, and retirement contributions.
Federal Income Tax
This is the tax you owe to the federal government. The amount withheld depends on your W-4 form selections. If you claimed single with no dependents, more is withheld. If you claimed married with dependents, less is withheld. This is not a fixed percentage — it is based on tax brackets. The goal is to have roughly the right amount withheld so you do not owe a large amount or get a huge refund at tax time.
FICA: Social Security and Medicare
FICA stands for Federal Insurance Contributions Act. It is two separate taxes. Social Security tax is 6.2 percent of your gross pay up to the annual limit which is 176,100 in 2026. Medicare tax is 1.45 percent of your gross pay with no limit. Together, FICA takes 7.65 percent of your paycheck. Your employer pays a matching 7.65 percent on top of that. These taxes fund Social Security retirement benefits and Medicare health insurance.
Other Common Deductions
Health insurance premium: your share of employer-sponsored health coverage. 401k or 403b contribution: your retirement savings, often with employer match (free money — contribute at least enough to get the full match). HSA or FSA: pre-tax contributions to health savings or flexible spending accounts. State income tax: varies by state, some states like Texas and Florida have no state income tax. Local or city tax: some cities levy additional income taxes. Disability insurance: short-term and long-term disability coverage. Union dues: if applicable.
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