How to Read a Pay Stub
Reading a pay stub for the first time can be overwhelming. Between gross pay, net pay, federal withholdings, FICA taxes, and various deduction codes, there is a lot of information packed into a single document. This guide walks you through each section of a typical pay stub line by line so you can verify your paycheck is correct and understand exactly where your money goes.
Understanding the Header
The top of every pay stub includes identifying information about the employer and the employee. This section typically shows the company name, address, and Employer Identification Number (EIN), along with the employee's name, address, and the last four digits of their Social Security number. Double-check these details each pay period to make sure they are correct, as errors here can cause problems with tax filings later.
- Employer name and address
- Employer Identification Number (EIN)
- Employee name and address
- Employee SSN (usually masked as XXX-XX-1234)
- Pay period start and end dates
- Check number or direct deposit reference
Earnings Section
The earnings section is where you see how your gross pay was calculated. For hourly workers, it shows hours worked and the hourly rate. For salaried employees it shows the per-period salary amount. This section may also include separate lines for overtime, holiday pay, bonuses, commissions, or paid time off (PTO) that was used.
- Regular hours - standard hours worked at the base hourly rate
- Overtime hours - hours exceeding 40 per week, typically paid at 1.5x the regular rate
- Holiday pay - premium pay for working on designated holidays
- Bonus or commission - additional compensation earned during the pay period
- PTO or vacation - paid time off hours used, shown at the regular rate
- Tips or reimbursements - may appear as separate earnings lines depending on the employer
Pre-Tax Deductions
Pre-tax deductions are subtracted from your gross pay before income taxes are calculated, which lowers your taxable income. These deductions typically include retirement plan contributions and employer-sponsored health insurance premiums. Because they reduce taxable income, pre-tax deductions effectively give you a tax benefit on those dollars.
- 401(k) or 403(b) retirement contributions
- Health insurance premiums (medical, dental, vision)
- Health Savings Account (HSA) contributions
- Flexible Spending Account (FSA) contributions
- Commuter benefits (transit and parking)
Tax Withholdings
Tax withholdings are the amounts your employer sends to government agencies on your behalf. Federal income tax withholding is based on the information you provided on Form W-4, including your filing status and any additional withholding you requested. FICA taxes (Social Security and Medicare) are calculated at fixed percentages and are mandatory for nearly all workers.
- Federal income tax - based on W-4 elections, filing status, and income level
- State income tax - varies by state; some states have no income tax
- Local or city income tax - applies in certain jurisdictions like New York City or some Ohio cities
- Social Security tax - 6.2% of gross pay up to the annual wage base limit
- Medicare tax - 1.45% of all gross pay, plus an additional 0.9% on earnings over $200,000
Post-Tax Deductions
Post-tax deductions are taken from your pay after taxes have been calculated. These do not reduce your taxable income. Common post-tax deductions include Roth 401(k) contributions, union dues, wage garnishments, and certain voluntary benefits like supplemental life insurance.
- Roth 401(k) or Roth 403(b) contributions
- Union dues
- Wage garnishments (child support, student loans, tax levies)
- Supplemental life or disability insurance
- Charitable contributions through payroll giving
Year-to-Date Totals
Year-to-date (YTD) totals show the cumulative amounts for each earnings and deduction category since January 1 of the current year. These running totals are critical for verifying that your pay is on track and that Social Security withholding stops once you reach the annual wage base limit. At the end of the year your YTD totals should closely match the figures on your W-2 form.
- YTD gross earnings - total income earned so far this year
- YTD federal tax withheld - should approximate your expected annual tax liability
- YTD Social Security - should stop accumulating once the wage base limit is reached
- YTD Medicare - accumulates all year with no cap
- YTD net pay - the total amount you have actually received after all deductions
Common Mistakes to Watch For
Even with automated payroll systems, errors can occur. Reviewing your pay stub each period helps you catch mistakes before they snowball into larger problems at tax time. If you find a discrepancy, contact your employer's payroll or HR department promptly to get it corrected.
- Incorrect hours or pay rate - especially after a raise that has not been applied yet
- Wrong filing status - if your W-4 was not updated after a life event like marriage
- Missing pre-tax deductions - benefits enrollment changes that were not processed
- Social Security over-withholding - amounts still being deducted after you hit the wage base limit
- State tax errors - withholding for the wrong state, common for remote workers
- Stale direct deposit info - verify account and routing numbers after switching banks