Your first paycheck can be a shock. You expected one number, but you got something much smaller. That gap is explained by your pay stub—if you know how to read it.
The Structure of a Pay Stub
Pay stubs typically have four main sections:
- Gross Pay - What you earned
- Taxes - What the government takes
- Pre-Tax Deductions - Benefits taken before taxes
- Post-Tax Deductions - Benefits taken after taxes
- Net Income|Net Pay - What you actually receive
Gross Pay
This is your total earnings for the pay period:
- Salary: Your regular wages
- Overtime: Time-and-a-half for hours over 40/week
- Bonuses: Any additional compensation
- PTO payout: Paid time off used
If you're paid biweekly (every two weeks), your gross pay is your annual salary ÷ 26.
$52,000 salary ÷ 26 = $2,000 per paycheck (gross)
Taxes Withheld
Federal Income Tax
Based on your W-4 form choices. More allowances = less withheld.
State Income Tax
If your state has income tax (not all do). Same concept as federal.
Social Security (FICA)
6.2% of your gross pay, up to $168,600 (2024). This funds your future Social Security benefits.
Medicare
1.45% of your gross pay, no limit. Additional 0.9% on income over $200,000.
Local Taxes
Some cities have their own income tax. Check if yours does.
Pre-Tax Deductions
These come out BEFORE taxes are calculated, which saves you money:
401(k) / 403(b)
Your retirement contributions. $200 contribution might only reduce take-home by $150-160 because of tax savings.
Your share of employer-provided health coverage.
Contributions
Health Savings Account deposits (if you have a high- health plan).
FSA Contributions
Flexible Spending Account for medical or dependent care expenses.
Dental/Vision Insurance
Separate premiums from main health insurance.
Pre-tax means: lower taxable = lower taxes = you keep more money.
Post-Tax Deductions
These come out AFTER taxes:
Roth 401(k)
Unlike traditional 401(k), Roth contributions are taxed now for tax-free growth later.
Employer-provided beyond a certain amount, or voluntary additional coverage.
Disability Insurance
If you pay for additional coverage beyond employer-provided.
Wage Garnishments
Court-ordered deductions for child support, tax liens, or debt judgments.
Union Dues
If you're in a union.
Reading a Real Example
Let's break down a sample biweekly paycheck:
| Category | This Period | Year-to-Date |
|---|---|---|
| Gross Pay | $2,500 | $15,000 |
| Federal Tax | -$250 | -$1,500 |
| State Tax | -$100 | -$600 |
| Social Security | -$155 | -$930 |
| Medicare | -$36 | -$218 |
| Total Taxes | -$541 | -$3,248 |
| 401(k) | -$150 | -$900 |
| Health Insurance | -$100 | -$600 |
| HSA | -$50 | -$300 |
| Total Pre-Tax | -$300 | -$1,800 |
| Roth 401(k) | -$50 | -$300 |
| Total Post-Tax | -$50 | -$300 |
| Net Pay | $1,609 | $9,652 |
Your $65,000 salary ($2,500 × 26) becomes $1,609 take-home per paycheck.
Year-to-Date (YTD) Totals
Your pay stub shows cumulative totals for the year. Use these to:
- Verify you're on track for your salary
- Check if 401k contributions are reaching limits
- Prepare for tax filing
- Ensure deductions are correct
What to Check
Review your pay stub regularly for:
Errors:
- Wrong pay rate
- Missing hours
- Incorrect deductions
- Wrong tax
Optimization:
- Are you contributing enough to get full ?
- Is your tax withholding appropriate (not too much refund, not owing)?
- Are you using available pre-tax benefits?
Adjusting Your Withholding
If you consistently get large refunds or owe money:
- Submit a new W-4 to HR
- Use the IRS Withholding Calculator
- Aim for a small refund or breaking even
Getting $3,000 refunds means $250/month that could have been in your earning .
The Bottom Line
Your pay stub tells the full story of your compensation. Understanding each line helps you verify you're paid correctly, optimize your benefits, and know exactly how much money you have to work with each month.