Start at the top: gross pay
Gross pay is what you earned before anything is taken out: hours times your rate, or your salary for the period, plus overtime, bonuses or commissions. Check that the hours and rate match what you expect.
Pre-tax deductions
Some items come out before income tax is calculated, which lowers your taxable wages. Common ones are traditional 401(k) contributions, employer health, dental and vision premiums, and health savings account (HSA) contributions. They reduce your take-home pay by less than their full amount because you pay less income tax.
Taxes withheld
- Federal income tax is estimated from the Form W-4 you gave your employer and the IRS withholding tables. It is a prepayment, not your final bill.
- Social Security (6.2%) applies to wages up to an annual limit called the wage base ($184,500 for 2026). Past that limit it stops for the rest of the year.
- Medicare (1.45%) applies to all wages with no cap. Higher earners owe an extra 0.9% on wages above $200,000 for single filers.
- State and local taxes vary. Pennsylvania, for example, has a flat state income tax rate plus a local earned income tax that depends on where you live and work. Some states have no income tax.
Your employer also pays a matching Social Security and Medicare amount. It does not appear on your stub and is not taken from your pay.
Post-tax deductions
These come out after taxes are figured: Roth 401(k) contributions, union dues, wage garnishments, and some insurance. They do not reduce your income tax.
Net pay
Net pay is what lands in your account: gross pay minus every deduction above. The year-to-date (YTD) columns add each line up across the year, which is useful for checking whether you are approaching the Social Security wage base or your 401(k) limit.
Why a refund or a bill happens
Withholding is a guess made during the year. At tax time your actual tax is calculated and compared with what was withheld. A refund means too much was withheld, so you lent the government money interest-free. A bill means too little was. If either surprises you, a new W-4 changes how much is withheld going forward.
A quick checklist
- Do the hours and rate match?
- Are your 401(k) and insurance amounts what you elected?
- Do Social Security and Medicare equal 6.2% and 1.45% of taxable wages?
- Is your state and local tax right for where you live and work?
- Does YTD gross pay add up over the year?
Try it yourself
Reviewed November 2026. Educational information, not tax, legal or financial advice. All guides