Most people glance at the net pay number on their pay stub and ignore everything else. The rest of the stub is a wall of abbreviations and numbers that nobody explained during onboarding. But that information tells you exactly where your money goes before you see it, and sometimes it reveals errors that cost you hundreds of dollars per year.
Gross pay vs net pay
Gross pay is the total amount you earned before anything gets taken out. If your salary is $55,000 a year and you’re paid biweekly, your gross pay per check is about $2,115.
Net pay is what actually lands in your bank account after taxes, benefits, and other deductions. The gap between gross and net is where most people lose track of their money. On a $55,000 salary, net pay might be $1,500 to $1,650 per check depending on your deductions. That’s 22% to 29% of your gross disappearing before you touch it.
Understanding what fills that gap matters because some of it is mandatory (taxes), some is optional (retirement contributions, extra insurance), and some of it might be wrong.
Federal income tax withholding
This is the biggest deduction for most people. The amount withheld depends on how you filled out your W-4 form when you started the job. The W-4 tells your employer how much federal tax to withhold based on your filing status, number of dependents, and any additional withholding you requested.
If you filled out the W-4 without thinking about it (most people do), you might be overwithholding or underwithholding. Overwithholding means you get a big tax refund in April, which feels nice but means you gave the government an interest free loan all year. Underwithholding means you owe money at tax time, possibly with penalties.
The goal is to get withholding close to your actual tax liability so you neither owe a lot nor get a huge refund. If your last refund was over $1,000, consider adjusting your W-4 to reduce withholding. That extra money in each paycheck is worth more to you throughout the year than a lump sum in April.
State and local taxes
Depending on where you live, you may see state income tax, city or county tax, or both. Some states (Florida, Texas, Nevada, Washington, and a few others) have no state income tax at all. If you live in one of these states, this line is absent.
For states with income tax, rates range from under 3% to over 13% depending on the state and your income level. California and New York are on the high end. States like North Carolina and Illinois use a flat rate.
If you recently moved to a different state or started working remotely from a new location, check that your pay stub reflects the correct state. Employers sometimes continue withholding for the wrong state after a move.
Social Security and Medicare (FICA)
These two lines are on every pay stub. Social Security takes 6.2% of your gross pay up to the wage base limit ($168,600 for 2025). Medicare takes 1.45% with no cap. Combined, that’s 7.65% of your paycheck.
Your employer matches this amount, so the total FICA contribution on your behalf is 15.3%. You only see your half on the stub.
If you earn above the Social Security wage base, the 6.2% stops being deducted after you hit the limit. You’ll notice slightly larger paychecks toward the end of the year if your salary is above that threshold.
Self-employed people pay both halves (15.3% total), which is why self-employment tax feels so much more painful than regular W-2 employment.
Health insurance premiums
If your employer offers health insurance and you enrolled, the premium comes out of your paycheck. This is usually a pre-tax deduction, meaning it reduces your taxable income. You’ll see it listed as something like “Medical,” “Health,” or “Dental/Vision.”
Check this number against what your employer told you the premium would be during open enrollment. Errors happen. Premiums sometimes get entered incorrectly, or you get charged for a plan level you didn’t select. It’s worth verifying at least once a year, especially after open enrollment changes.
Pre-tax means the deduction comes out before taxes are calculated, which effectively gives you a discount. A $200 per paycheck health premium pre-tax saves you roughly $50 in taxes compared to paying the same amount after tax. You never see this savings directly, but it’s built into your stub.
Retirement contributions
If you contribute to a 401(k), 403(b), or similar employer plan, the deduction shows up here. Traditional 401(k) contributions are pre-tax, reducing your taxable income. Roth 401(k) contributions are after-tax and don’t reduce your current taxable income.
Check two things: that the percentage matches what you elected, and that your employer match is showing up. The match might appear on the stub as a separate line, or it might only show up in your 401(k) account statements. If you’re supposed to be getting a match and you’re not seeing it anywhere, ask HR.
Also watch for auto-escalation. Some employers automatically increase your contribution percentage by 1% each year unless you opt out. This is generally a good thing, but you should know it’s happening so the slightly smaller paycheck doesn’t surprise you.
Other deductions to look for
Life insurance, disability insurance, HSA or FSA contributions, union dues, parking deductions, loan repayments (like 401(k) loans). These all appear as separate line items.
If you see a deduction you don’t recognize, ask HR or payroll. Sometimes deductions from old benefit elections carry over after you’ve canceled the benefit. Sometimes there’s a garnishment you didn’t know about. The stub is the only place you’ll catch these.
Year-to-date totals
Most pay stubs include year-to-date (YTD) columns for every line item. These show how much you’ve earned and had deducted since January 1. The YTD gross should roughly match your salary prorated for the time of year. The YTD deductions should match your annual benefit costs prorated the same way.
The YTD numbers are useful for tax planning. If you’re approaching the end of the year and your YTD federal withholding looks low compared to what you’ll owe, you can increase withholding for the last few paychecks to avoid an underpayment penalty. If withholding looks high, you know a refund is coming.
Check it at least twice a year
Read your pay stub carefully after any change: new job, raise, promotion, open enrollment, W-4 update, address change, new state. And read it once more in October or November to compare YTD withholding against your expected tax liability.
Payroll errors are more common than you’d think. Wrong tax rate, missing retirement match, incorrect insurance premium, duplicate deduction. Each one is small per paycheck but adds up over a year. Ten minutes reading the stub catches problems that can cost you $500 or more.