How to Read Your Paycheck: Gross, Net & Every Deduction

Your paycheck is a small math problem. Once you can read each line, you’ll catch errors that cost you hundreds of dollars a year, plan your budget accurately, and know exactly what to change if you want more take-home pay.

This guide walks through every line on a typical U.S. Pay stub, with example math, and shows you how to spot the most common payroll mistakes.

The Big Picture: Gross vs. Net

Two numbers matter most:

• Gross pay: what you earned before deductions.
• Net pay: what actually hits your bank, also called “take-home pay.”

The gap between them, sometimes 25-35%, is where all the deductions live.

Example

• Gross pay: $5,000 / month.
• Total deductions: $1,400.
• Net pay: $3,600.

You’re earning $5,000 but planning your life around $3,600. Budgeting against gross is one of the most common money mistakes.

Section 1, Earnings

This part shows your gross pay.

Hourly employees

• Hours worked × hourly rate = regular pay.
• Overtime hours × 1.5 × hourly rate = overtime (after 40 hours/week in most states).
• Bonus, commission, holiday pay listed separately.

Salaried employees

• Annual salary ÷ pay periods per year = gross per paycheck.
• For biweekly pay: salary ÷ 26.
• For semi-monthly (15th and last day): salary ÷ 24.

Example

$65,000 salary ÷ 26 biweekly checks = $2,500 gross per check.

Section 2, Federal Income Tax (FIT)

The IRS takes a chunk based on: – Your W-4 form (filing status, dependents, additional withholding). – A progressive tax bracket system.

2026 federal tax brackets (single filer, simplified)

• 10% on income up to $11,600.
• 12% on income $11,600 – $47,150.
• 22% on income $47,150 – $100,525.
• 24% on income $100,525 – $191,950.
• 32%, 35%, 37% at higher brackets.

Real math

On a $65,000 salary (single), your effective federal tax rate is roughly 12%, not 22%. The first $11,600 is taxed at 10%, the next chunk at 12%, etc.

What to check

• Your W-4 reflects your actual situation.
• If you owe a big tax bill in April, you may need to increase withholding.
• If you got a huge refund, you’re loaning the government money interest-free, consider decreasing withholding.

Section 3, State Income Tax

Varies wildly: – No state tax: Florida, Texas, Washington, Nevada, Tennessee, New Hampshire, South Dakota, Wyoming, Alaska. – Flat tax: Colorado (4.4%), Illinois (4.95%), Indiana, North Carolina, several others. – Progressive: California, New York, others.

Example

California top earners pay up to 13.3%. Texas earners pay 0%. That’s a real difference for the same gross income.

Section 4, FICA (Federal Insurance Contributions Act)

Two parts:

Social Security: 6.2%

On wages up to a cap (~$168,600 in 2024-25; rises slightly each year).

Medicare: 1.45%

On all wages, plus an additional 0.9% on income above $200K (single).

Combined FICA: 7.65%

This is the line that surprises young workers most. You can’t reduce FICA with deductions. It’s a flat 7.65% off the top.

Example

$2,500 gross paycheck × 7.65% = $191.25 FICA.

Section 5, Pre-Tax Deductions

These come out before federal/state taxes are calculated, lowering your taxable income.

Common pre-tax items

• 401(k) traditional contribution. Up to $23,500 in 2025.
• Health insurance premium (sometimes).
• HSA (Health Savings Account) contribution.
• FSA (Flexible Spending Account) for medical or dependent care.
• Commuter benefits.

Why they matter

A $300 traditional 401(k) contribution lowers your taxable income by $300, saving you maybe $66 in taxes (at 22% bracket). Your paycheck shrinks by ~$234, but the full $300 lands in your retirement.

This is one of the most powerful payroll moves you can make.

Section 6, Post-Tax Deductions

These come out after taxes.

Common post-tax items

• Roth 401(k) contribution. No tax savings now; tax-free in retirement.
• Life insurance premium.
• Disability insurance.
• Garnishments (court-ordered).
• Union dues (sometimes).

These reduce your take-home but don’t reduce your tax bill.

Section 7, Other Common Lines

YTD (Year-to-Date)

Cumulative totals from January 1. – YTD gross. – YTD federal tax. – YTD FICA.

Use YTD to forecast tax season and check that withholding is on track.

Employer contributions

Some pay stubs show what your employer contributes (401(k) match, health insurance share). These don’t affect your paycheck but are part of your total compensation.

PTO balance

Hours of paid time off available.

A Sample Pay Stub Math Walkthrough

Single employee, $65,000 salary, biweekly, contributes 6% to traditional 401(k), $80 health premium.

Earnings – Regular pay: $2,500.00

Pre-Tax Deductions – 401(k) (6%): -$150.00 – Health premium: -$80.00 – Taxable wages: $2,270.00

Taxes – Federal income tax (12% effective bracket): -$272.40 – State income tax (5%): -$113.50 – Social Security (6.2% × $2,420, FICA wages, before 401k but after health): -$150.04 – Medicare (1.45%): -$35.09

Post-Tax Deductions – Life insurance: -$10.00

Net Pay $2,500 – $150 – $80 – $272.40 – $113.50 – $150.04 – $35.09 – $10 = $1,688.97

That’s the number that lands in the bank account. Notice how the $2,500 gross becomes ~$1,690 net, a 32% gap.

What to Check on Every Paycheck

1. Hours and rate

Match what you worked. Overtime should be 1.5× your regular rate.

2. Withholding consistency

If your federal or state tax suddenly changed, your W-4 may have been processed incorrectly.

3. 401(k) contribution

Make sure the right percentage is being deducted, and the employer match is showing if you qualify.

4. Health insurance deduction

Single coverage vs. Family rate matters, make sure you’re being charged the right plan.

5. PTO accrual

You should earn a set number of hours per pay period. Make sure it’s adding up.

6. Garnishments or oddities

Any deduction you don’t recognize, ask HR immediately.

Common Paycheck Mistakes

Wrong W-4

Filing single when you’re married (or vice versa) drastically changes withholding.

Pre-tax vs. Post-tax confusion

A Roth 401(k) cut doesn’t lower your taxable income. A traditional 401(k) does. Choose intentionally.

Bonus tax shock

Bonuses are often withheld at a flat 22% federal rate, even if your normal bracket is 12%. The extra comes back at tax time, but it surprises people.

Forgetting state tax differences when moving

Moving from California to Texas means a noticeable paycheck increase from no state income tax, plan for it.

Not adjusting for major life changes

Marriage, baby, mortgage, job change, update your W-4 within a month.

How to Increase Your Take-Home (Without a Raise)

1. Adjust your W-4

If you got a huge refund last year, you’re over-withholding. Lower it to bring more home each month.

2. Choose health plan carefully

A higher-deductible HSA plan often gives a bigger paycheck, and the HSA contribution is pre-tax.

3. Maximize HSA / FSA contributions

Both reduce taxable income.

4. Pre-tax 401(k) up to employer match

Free money + tax savings. Always grab the full match.

5. Pre-tax commuter benefits

If your employer offers them, parking and transit can come pre-tax.

Free Resources

Effortless Math has practical math practice for every grade and topic:

• Math Blog, financial math guides.
• Math Topics Library, percents, decimals, real-world math.
• Percent Worksheets (resource currently unavailable), the math behind every paycheck.

Frequently Asked Questions

How do you read your paycheck stub? Start with gross pay at the top, which is what you earned before anything is taken out. Then read down through taxes (federal, state, Social Security and Medicare), pre-tax deductions such as 401(k) and health insurance, and post-tax deductions. Net pay at the bottom is what reaches your bank. Check that hours × rate matches your gross pay every time.

How do you read your pay statement? A pay statement usually has columns for the current period and year-to-date (YTD) totals. Match each line code to its meaning: FIT is federal income tax, SS or OASDI is Social Security, MED is Medicare. Social Security is 6.2% and Medicare is 1.45% of wages, so on a $2,500 check expect about $155 and $36.25. Ask payroll about any code you do not recognize.

How do you read your last pay stub for taxes? Look at the year-to-date (YTD) column on your final stub of the year. It shows your total gross pay, federal and state income tax withheld, Social Security and Medicare for the year. Subtract YTD pre-tax deductions like 401(k) contributions from YTD gross to estimate taxable wages. Use these numbers to check your W-2 when it arrives, and file with the W-2 itself.

Can you use your last pay stub as a W-2? Your last pay stub can help you estimate what your W-2 will show, but it is not a replacement for filing. The W-2 wage box is usually YTD gross pay minus pre-tax deductions such as traditional 401(k) and health premiums, so it may be lower than your YTD gross. If your W-2 is late or missing, contact your employer first, then the IRS.

Is there a worksheet for reading your paycheck stub? Yes, a good paycheck worksheet gives you a sample stub and asks you to find gross pay, each deduction and net pay. You can make your own from a real stub: add every deduction, subtract the total from gross pay, and see whether you get the net pay shown. For example, $5,000 gross minus $1,400 in deductions should equal $3,600 net.

Read Every Stub, Catch Every Error

The 5 minutes you spend reading your paycheck each pay period can catch payroll errors, overcharged premiums, or wrong tax withholdings that cost you hundreds of dollars a year. Most workers never look. Be the one who does.