| Social Security Tax Rate (Employee) | 6.2% of covered wages (IRS, 2024) |
| Medicare Tax Rate (Employee) | 1.45% of wages (IRS, 2024) |
| Social Security Wage Base Limit | $168,600 (IRS, 2024) |
| 401(k) Employee Contribution Limit | $23,000 per year (IRS, 2024) |
| HSA Contribution Limit (Self-Only Coverage) | $4,150 per year (IRS, 2024) |
| Standard Federal Withholding Form | W-4 (IRS) |
The Big Picture: Gross Pay vs. Net Pay
The first number to find on any pay stub is your gross pay — the full amount you earned before anything is withheld. If you're salaried at $60,000 a year and paid biweekly, your gross pay per check is $2,307.69. That figure is the starting point for every calculation that follows.
After taxes and deductions are applied, what remains is your net pay — the actual deposit to your bank account. The difference between these two numbers isn't money lost; it's money directed toward taxes, benefits, and retirement accounts on your behalf.
Your stub also displays YTD (year-to-date) totals in a separate column alongside each line item. These running totals let you verify that withholding has been accurate all year and confirm you haven't exceeded contribution limits for accounts like your 401(k) or HSA.
| Social Security Tax Rate (Employee) | 6.2% of covered wages (IRS, 2024) |
| Medicare Tax Rate (Employee) | 1.45% of wages (IRS, 2024) |
| Social Security Wage Base Limit | $168,600 (IRS, 2024) |
| 401(k) Employee Contribution Limit | $23,000 per year (IRS, 2024) |
| HSA Contribution Limit (Self-Only Coverage) | $4,150 per year (IRS, 2024) |
| Standard Federal Withholding Form | W-4 (IRS) |
Taxes: Federal, State, and FICA Explained
Three tax categories typically appear on a pay stub:
- Federal income tax — withheld based on your W-4 elections and the current IRS withholding tables. This is not a flat percentage; it adjusts with your income level and filing status.
- State (and sometimes local) income tax — varies significantly by location. Some states levy no income tax at all, while others have graduated rates.
- FICA taxes — split into Social Security (6.2%) and Medicare (1.45%), totaling 7.65% of your wages. Your employer matches this exact amount separately.
High earners should also watch for the Additional Medicare Tax of 0.9%, which applies to wages above $200,000 for single filers. Unlike the standard FICA rate, employers do not match this portion.
Your W-4 Shapes Your Withholding
The federal income tax withheld each pay period is directly tied to the W-4 form you filed with your employer. Major life changes — marriage, a new dependent, a second job — can shift how much you owe at tax time. Submitting an updated W-4 to HR helps you stay closer to the right withholding amount. You can file a new one at any time; it takes effect within a few pay cycles.
For a broader grounding in financial language, see our personal finance terms reference guide covering concepts like net worth, APR, and amortization.
Deductions: Pre-Tax, Post-Tax, and What They Cost You
Below the tax lines, you'll find a deductions section. These split into two buckets that directly affect how much taxable income your employer reports:
- Pre-tax deductions
- Subtracted before income taxes are calculated, lowering your taxable wages. Common examples include traditional 401(k) and 403(b) contributions, health and dental insurance premiums paid through your employer, FSA deposits, and HSA contributions.
- Post-tax deductions
- Subtracted after taxes are applied, so they don't reduce your taxable income. Roth 401(k) contributions, supplemental life insurance premiums above the tax-free threshold, and court-ordered garnishments fall here.
Knowing which category each deduction falls into helps you make smarter benefit elections during open enrollment and catch any payroll errors early. When you're ready to build a full picture of your cash flow, starting with your net pay figure — not gross — gives you the most accurate baseline for budgeting. A structured spending audit is a practical next step once you know exactly what you're bringing home.
Gross Pay
The total amount you earn before any taxes or deductions are taken out. This is the number your salary or hourly rate is based on.
Net Pay
The amount deposited into your bank account after all taxes and deductions have been subtracted from gross pay. Often called 'take-home pay.'
FICA
The Federal Insurance Contributions Act tax, which funds Social Security and Medicare. Both you and your employer contribute a portion of your wages to FICA.
Pre-Tax Deduction
Money subtracted from gross pay before income taxes are calculated, reducing your taxable income. Common examples include 401(k) contributions and health insurance premiums.
Post-Tax Deduction
Money subtracted after taxes are calculated, so it does not reduce your taxable income. Roth 401(k) contributions and wage garnishments are typical examples.
YTD (Year-to-Date)
A running total of your earnings, taxes, and deductions from January 1 through the current pay period. Useful for verifying accuracy and tracking annual contribution limits.
This article provides general financial education and is not personalized financial, tax, or legal advice. Consult a qualified professional for guidance specific to your situation.