How to read a pay stub

The example on this page is a single employee in California earning $72,000 a year, paid every two weeks. She puts 6% of pay into a traditional 401(k) and pays $120.00 a paycheck toward her health plan through a section 125 cafeteria plan. Her W-4 is the default: single, nothing else filled in. Every figure below is what our paycheck engine produces for that setup, and it is what a payroll system following IRS Publication 15-T and California’s DE 44 would print.

The top line: gross pay

Gross pay is the salary divided by the number of paychecks in the year: $2,769.23 here. Hourly stubs show hours times rate, with overtime, shift differentials and tips listed as separate earnings lines. Bonuses and commissions also appear as their own lines, which matters because the IRS lets employers withhold on them differently; our guide to bonus tax covers that.

If the gross figure looks wrong, check the pay frequency first. Twice a month is 24 paychecks and every two weeks is 26, so the same salary gives different gross amounts on the two schedules.

Pre-tax deductions come off before tax, but not before every tax

This is the part of the stub that confuses most people, because there are two kinds of pre-tax deduction and they do not behave the same way.

The 401(k) deferral of $166.15 is excluded from federal income tax and, in California, from state income tax. It is not excluded from Social Security or Medicare. You pay FICA on the money now, and income tax on it later when you withdraw it.

The section 125 health premium of $120.00 is excluded from almost everything: federal income tax, state income tax in most states, Social Security, Medicare and California’s disability insurance. That is why the stub shows three different wage bases:

• federal taxable wages: gross less both deductions, $2,483.08;
• Social Security and Medicare wages: gross less only the health premium, $2,649.23;
• California SDI wages: the same as the FICA wages in this case.

Many stubs print these bases in a small box labeled “taxable wages” or “subject wages”. If yours does, you can check each tax against its base with a calculator.

HSA contributions made through payroll behave like the health premium: free of income tax and FICA. A Roth 401(k) is the opposite of a traditional one: it comes out after every tax and shows up among the after-tax deductions near the bottom of the stub.

Federal income tax withholding

Federal withholding on this paycheck is $214.12. It is worked out from the federal taxable wages, the pay frequency and the W-4, using the percentage method tables. It is not a flat rate, and it is not the tax you owe. It is a payment toward the year’s bill, and the difference is settled on the return. A change to the W-4 changes this line and nothing else; our W-4 guide shows by how much.

Social Security and Medicare

These two lines are flat percentages of the FICA wages. Social Security is 6.2%, which gives $164.25. Medicare is 1.45%, which gives $38.41. Some stubs combine them as “FICA” or “OASDI and Medicare”.

Two limits change these lines for higher earners. Social Security stops once your wages for the year pass the wage base, $184,500 for 2026, so a high earner’s December stubs show no Social Security at all. Medicare has no cap, and an extra 0.9% is withheld on wages above $200,000 with one employer. The FICA guide walks through the paycheck where the wage base is crossed.

State income tax and state programs

California withholding on this paycheck is $88.57. Like the federal line, it comes from a state formula applied to state taxable wages, and California has its own withholding certificate, the DE 4. A stub from Texas, Florida or another state without an income tax has no line here.

Below it sits CA SDI (State Disability Insurance), $34.44 on this paycheck. That is 1.3% of SDI wages, and in California it applies to all wages with no yearly cap. Other states have their own versions: New Jersey and New York take disability and family leave contributions, Washington takes paid family leave and its long-term care premium, and several states fund paid leave the same way. They are not income tax, so they continue in states with no income tax. Each state paycheck page lists the levies that apply there.

Some stubs also show local taxes: New York City and Yonkers, Philadelphia’s wage tax, Ohio city taxes, Pennsylvania’s earned income tax, Michigan city taxes and others. Our guide to local income taxes lists them.

Net pay

After everything, the deposit is $1,943.29, or 70.2% of gross pay. Taxes of every kind add up to $539.79 of the difference; the rest is the 401(k) and the health premium, which are still your money or your coverage.

If net pay suddenly changes with no raise, look for a change in deductions first: a new benefits year, a 401(k) rate that stepped up, or the Social Security wage base being reached late in the year.

The year-to-date columns

Most stubs print a second column with totals for the year so far. On this employee’s tenth paycheck of the year, the year-to-date column would show $27,692.30 of gross pay, $2,141.20 of federal withholding, $1,642.50 of Social Security and $19,432.90 of net pay.

These columns are the quickest way to check a W-4 halfway through the year. Take the year-to-date federal withholding, scale it to a full year, and compare it with your expected tax. Our tax refund estimator does that with the figures off your stub.

How the stub becomes a W-2

The last stub of the year should match the W-2 you get in January, and the differences between its boxes are the same differences as on the stub. For this employee:

• Box 1, wages for income tax: $64,560, which is gross pay of $72,000 less the 401(k) and the health premium;
• Box 3 and Box 5, Social Security and Medicare wages: $68,880, which is gross pay less only the health premium;
• Box 12, code D: the 401(k) deferrals for the year.

People are often surprised that Box 1 is lower than their salary. Now you can see why. The 401(k) limit for 2026 is $24,500, and every dollar deferred under it lowers Box 1 by a dollar.

Errors worth catching

• Wrong state. Remote workers sometimes have the employer’s state withheld instead of their own. The state line will name the state.
• Pre-tax deductions taxed as post-tax. If a health premium appears among the after-tax deductions, ask payroll whether you enrolled through the section 125 plan.
• Social Security after the wage base. If you changed employers mid-year, each employer withholds up to the base, so you can overpay. The excess comes back as a credit on your return, not from either employer.
• Missing local tax. Moving to a city with its own income tax does not always update payroll. The tax is still owed, usually with the city return.

Every figure on this page is computed by the same code as our calculators. How we calculate.