Reading Your First Paycheck: A Field Guide to the Numbers

What a pay stub actually is

A pay stub is the itemized record your employer provides each time you are paid. It documents your earnings for that pay period and lists every amount subtracted before you receive the remainder. Whether you are paid weekly, biweekly, or twice a month, the stub follows the same basic structure.

Pay stubs typically show two columns of figures: current period amounts and year-to-date totals. The year-to-date column accumulates every dollar earned and every deduction taken since January 1, which is useful when you need to verify your annual income or check that FICA contributions are tracking correctly.

Before reading the numbers, make sure your personal information is accurate: your legal name, last four digits of your Social Security number, and employee ID if one appears. A data entry error at setup can affect your tax records.

Gross pay vs. net pay

Gross pay is your wages before anything is removed. If your annual salary is $52,000 and you are paid biweekly, your gross pay each period is $2,000. Hourly workers see gross pay calculated as hours worked multiplied by their hourly rate, plus any overtime at the applicable rate.

Net pay is what transfers to your bank account. The difference between gross and net is the sum of all deductions, mandatory and voluntary. For most workers, net pay runs noticeably lower than gross pay, sometimes by 25 to 35 percent depending on income level, state of residence, and benefits elections.

For a broader grounding in financial terms, our personal finance vocabulary guide covers key concepts including net worth, cash flow, and other terms that connect to how your paycheck fits your overall financial picture.

Federal and state tax withholdings

Federal income tax withholding is calculated using the information you provided on your W-4 form. The IRS provides withholding tables that employers use to determine how much to hold back based on your filing status, pay frequency, and any adjustments you specified. Filing as single generally produces more withholding than filing as married; claiming additional deductions on the W-4 reduces withholding.

State income tax withholding appears as a separate line on your stub if you live in a state that levies an income tax. Nine states currently have no broad-based individual income tax, so residents of those states will not see this line. State withholding is based on the state equivalent of your W-4, sometimes called a state withholding certificate.

FICA: Social Security and Medicare

FICA contributions appear as two separate deductions. The Social Security tax is 6.2% of gross wages up to an annual wage base limit set each year by the Social Security Administration. Once your year-to-date wages exceed that limit, the Social Security deduction stops for the rest of the calendar year. The Medicare tax is 1.45% of all covered wages with no cap.

Your employer matches both amounts, paying an equal share on your behalf directly to the IRS. High earners pay an additional 0.9% Medicare surtax on wages above $200,000 for single filers, which employers are required to withhold once that threshold is crossed in a calendar year.

Other common deductions

Beyond taxes, your stub may show deductions for benefits you elected during open enrollment. Health, dental, and vision insurance premiums paid through an employer-sponsored plan are usually taken as pre-tax deductions, which lowers the wages subject to federal and state income tax. If you enrolled in a health plan through your job, our health insurance starter guide explains how employer-sponsored coverage works and what terms like deductible and copay mean.

Retirement contributions to a traditional 401(k) are also pre-tax, reducing your taxable wages for the period. Roth 401(k) contributions, by contrast, are taken after tax, so they do not reduce current taxable wages but grow tax-free. Other lines you might see include flexible spending account contributions, life insurance premiums, and any wage garnishments ordered by a court.

How to check your stub for errors

Errors in payroll are more common than many workers realize. Check your gross pay against your agreed salary or hours worked. Confirm that your health insurance and retirement deductions match the amounts you elected. Compare year-to-date Social Security withholding against 6.2% of your year-to-date gross wages to spot over- or under-withholding.

If you find a discrepancy, contact your employer's payroll department in writing and keep a copy of your message. Corrections that affect your wages or withholding may require an amended W-2 at year end. Consulting a licensed tax professional is a practical step if the error involves multiple pay periods or a significant dollar amount. This article provides general information only and is not tax or financial advice; your specific situation may differ.

This article is for informational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional or financial adviser for guidance specific to your circumstances.