How to Read Your Pay Stub: 7 Lines That Explain Every Deduction

Your pay stub answers one question: why is my paycheck smaller than my salary? Every line between gross pay and net pay falls into two groups, taxes the law requires and deductions you chose. Once you can sort each line into one of those groups, the whole stub makes sense.

The 7 lines that matter

Line 1 is gross pay. This is your earnings for the pay period before anything is taken out: salary or hourly wages plus overtime, bonuses, and commissions. Everything below it is subtracted from this number.

Line 2 is federal income tax withholding. Your employer estimates this from the Form W-4 you filled out when you were hired. A refund at tax time means too much was withheld during the year, and a bill means too little was. You can update your W-4 any time to change this line.

Line 3 is state and local income tax withholding. Not every state has an income tax, so this line may be zero where you live. Where it exists, it works like the federal line, estimated from your pay and your state withholding form.

Line 4 is Social Security tax. For 2026, employees pay 6.2 percent on wages up to $184,500, according to the Social Security Administration and the IRS. Once your year-to-date wages pass that cap, this withholding stops for the rest of the year.

Line 5 is Medicare tax. Employees pay 1.45 percent on all covered wages, with no cap. The IRS says employers also withhold an additional 0.9 percent on wages above $200,000 in a calendar year. Your final liability for that extra tax depends on your filing status.

Line 6 is pre-tax deductions you elected. The common ones are Traditional 401(k) contributions, health insurance premiums, and HSA or FSA contributions. These lower the wages used to figure your federal income tax.

Line 7 is post-tax deductions you elected. Roth 401(k) contributions are the classic example: they do not lower this year's taxable wages, but qualified withdrawals later are tax-free. Union dues and after-tax savings allotments can appear here too.

A worked example: the $5,000 paycheck

Take a monthly gross pay of $5,000. Social Security takes 6.2 percent, which is $310. Medicare takes 1.45 percent, which is $72.50. Those two are fixed by law and apply to nearly everyone.

Now add two elected deductions. A 5 percent Traditional 401(k) contribution is $250. Your share of the health insurance premium is $300 in this example. Subtract all four lines from gross pay:

$5,000 - $310 - $72.50 - $250 - $300 = $4,067.50

That $4,067.50 is your pay before federal and state income tax withholding, which depend on your W-4 and where you live. Your actual net pay, the deposit that hits your bank account, is what remains after those income taxes too.

Assumptions, so you can reproduce this: monthly pay period, 2026 FICA rates, the 401(k) rate and premium shown above, and no other deductions. Change any assumption and the arithmetic changes with it.

The pre-tax trick most people miss

Pre-tax does not mean the same thing for every tax. Health insurance premiums paid through an employer's cafeteria plan are generally exempt from both income tax and FICA tax, which makes them especially valuable dollar for dollar. Plan rules vary, so check with your payroll or benefits team.

Traditional 401(k) contributions are subtler. They reduce the wages your federal income tax is figured on, but they generally do not reduce the wages used for Social Security and Medicare tax. Many people assume their 401(k) shrinks every tax line, and this is the line where that assumption breaks.

Roth 401(k) contributions flip the pattern again. They leave this year's taxable wages untouched and move the tax benefit into retirement, just like the Roth IRA. If your stub shows both Traditional and Roth 401(k) lines, check which one your money is actually going into.

5 steps to read your own stub tonight

Step 1: Find your gross pay and your net pay. The gap between them is the total price of taxes and benefits for that period. Knowing the size of the gap is the point of the whole exercise.

Step 2: Circle the required taxes. Federal withholding, state withholding, Social Security, and Medicare are set by law. You cannot negotiate them, but you can adjust federal withholding with a new W-4.

Step 3: List your elected deductions separately. Write down each one with its amount and whether it is pre-tax or post-tax. This list is the part of your pay you actually control.

Step 4: Check the year-to-date column. Compare it with your own records, especially after a raise, a bonus, or a job change. Catching a withholding error in March beats catching it next April.

Step 5: Revisit after open enrollment. Benefit elections usually lock for the year outside open enrollment, with exceptions for events like marriage or a new child. Retirement contribution rates and HSA amounts can often be changed more freely, so confirm your plan's rules.

Keep your last pay stub of the year until your W-2 arrives. The year-to-date totals on that final stub should match the W-2 boxes, and comparing the two is the simplest way to spot a reporting mistake before you file. If anything looks off, your payroll department can explain the line or fix it.

This article is for general information, not financial advice.

Sources

• SSA, Social Security Tax Limits on Your Earnings
• IRS, Topic no. 751, Social Security and Medicare withholding rates