How to Read a Pay Stub

When part-time or full-time employees receive their pay, they also get a paper or digital pay stub from their employer. It’s important to know about the various sections on a pay stub in order to find out how much was taken out for taxes, insurance, and other deductions. This will explain the difference between your gross pay and your take-home pay.

What Is a Pay Stub?

A pay stub is a document that summarizes how your total earnings during a specific pay period were distributed. It is generally broken down into three main sections: how much you are being paid, the taxes you are paying, and any other deductions that are being made. 

The amount you are being paid for the current pay period (whether it’s weekly, biweekly, twice monthly, or monthly) generally comes first on your pay stub and is the most straightforward figure to understand.

What you’ll likely see in this section depends on whether you are a salaried or an hourly worker. If you work by the hour, your hourly rate and the number of hours you worked for the pay period will be listed. You may also see overtime hours. If you earn an annual salary, you’ll see your salary for the pay period and possibly bonuses.

Why Is a Pay Stub Important?

Pay stubs serve a much-needed purpose as a point of reference and accountability for both the employee and the employer. 

As an employee, seeing your take home pay and what was taken out for tax purposes can be helpful. You can use it as a guide when creating a budget to understand how much is coming in and where your money is going. 

Your pay stubs may also be requested if you are moving into a new house or renting. Landlords and financial lenders may use your pay stubs to verify your income to be sure you can afford the rent or mortgage. They may also be requested when you are seeking other types of loans such as car loans. 

It’s also not uncommon for government agencies or nonprofit organizations to request copies of your pay stubs if you apply for financial assistance, like student loans, for example. 

Finally, your pay stub can be essential in holding your employer accountable. If you check your pay stub regularly, you’ll be able to notice and rectify any payment inaccuracies, tax withholding issues, and more. If you discover an issue, you can use your pay stub as proof.

Elements of a Pay Stub

In addition to basic personal information such as your name, Social Security number, and possibly employee ID, there is a lot of information displayed on a pay stub. Below, we break it down so it’s easier to understand when you start earning an income.

• Pay period: This is the span of calendar dates that your paycheck covers. For example, if you get paid every two weeks, the pay period may look something like 3/1/24-3/15/24. You may also see “pay date” on the stub, and that is simply the day you receive funds.
• Hours worked: This indicates the number of hours you worked during the specific pay period, and it is common on the pay stubs of hourly or part-time workers. If you work 20 hours a week and your pay period is two weeks, the number of hours worked will likely state 40 hours.
• Gross pay: Gross pay is the money you earn before any deductions and withholdings are taken out. 
• Year to date: This is the total amount of money you earned in a calendar year. It is also referred to as YTD on pay stubs, and is usually found next to deductions, net pay, and gross pay. 
• Deductions: This refers to taxes, insurance premiums, and the cost of other programs that are subtracted from your total gross wages. Some deductions that may be listed include FICA tax and Medicare.
• Net pay or net income: This is the total amount of money earned minus the amount taken out from taxes and other deductions. Some people refer to it as “take-home pay.”

Retirement contributions to a company-sponsored plan such as a 401(k) also may be included on your pay stub, reducing your tax liability.

While the above elements are all commonly found on paystubs, they may vary depending on your personal circumstances. For example, you may live in a state that doesn’t collect state income taxes. Or, if you are on someone else’s healthcare plan, you won’t have any health plan deductions on your pay stub. 

What Pay Stub Deductions & Taxes Mean for Your Net Pay

Earnings and net pay are not the same. Earnings refer to the amount of money you made in total. Net pay is the amount of money you “take home with you” after the deductions are taken out of your paycheck. Deductions are subtracted from your gross pay to give you your net pay. 

These deductions can vary depending on your own personal financial situation. If you are a part-time or full-time employee or you own your own business, what you can deduct will look very different. If you need help understanding your deductions when tax season rolls around, consider consulting with a financial professional or advisor.

Federal Income Taxes

The principle behind federal income tax is that the government withholds a certain percentage of the money you earn in a year. However, that percentage can be fiendishly difficult to calculate for an individual.

The basic calculation is shown, below.

1. Your employer reports your annual salary as well as the number of dependents you report on your W-4 form to the federal government.
2. The Internal Revenue Service (IRS) then works out an estimate of how much federal income tax you should pay for a given year and divides this by the number of paychecks you will receive (generally 12, 24, or 26).
3. This amount will then be deducted from each paycheck. The same process applies to hourly employees—if you are paid hourly, your employer will estimate your monthly income and a percentage of your pay will be withheld for federal income tax.

Sometimes, the amount of federal income tax deducted from your earnings may be too high or too low. This could be due to a job change or the birth of a child, for instance. If your circumstances change, then you should inform the IRS or your company’s human resources (HR) department as soon as possible. If you have paid too much tax, they will calculate the amount you are due and pay you a refund.

State and Local Taxes (SALT)

You may also see state taxes deducted from your paycheck. State tax rates vary significantly from state to state; some states, like Florida and Texas, don’t have a state income tax. If you need to pay state income taxes, they are calculated in much the same way as federal income taxes.

Some localities levy an income tax. Some do not. If your city imposes an income tax, then you will likely have an amount withdrawn from each paycheck labeled local or with the name of your locality. You will generally pay the same amount each pay period for both state and local income taxes, so long as the amount you earn remains the same.

FICA Taxes

FICA taxes are those required by the Federal Insurance Contributions Act. These refer to withholdings from your paycheck for Social Security and Medicare. FICA withholdings are split evenly between employer and employee. For Social Security, each pays 6.2% (for a total of 12.4%); for Medicare, each pays 1.45% (for a total of 2.9%).

For the Social Security portion, there is a cap on the wages that are subject to the tax: The maximum wage is $176,100 for 2025. There is no wage limit for the Medicare portion. And for individuals whose earnings rise above $200,000 in a calendar year, a 0.9% Additional Medicare tax will be withheld from their pay above that threshold.

Other Deductions

Most paychecks will also contain a number of other deductions—on top of the taxes you are paying—that will further reduce your take-home pay. These may be included in the section with your taxes. Just as with your taxes, it’s impossible to detail all of them. But you should understand each deduction listed on your paycheck. If any aspect is unclear, it’s always best to consult with your employer. Here are the most common ones:

Insurance: If you are enrolled in employer-sponsored health, vision, or dental plans that you contribute to, the amount you are paying per paycheck will likely be on your pay stub. Deductions for life insurance and disability insurance should also be included, under a heading like “After-Tax Deductions” or “Other Benefits.”

Retirement plan: The amount deducted for your contributions to an employer-sponsored retirement plan such as a 401(k) should appear on your pay stub too.

Health savings accounts (HSAs) and flexible spending accounts (FSAs): These programs are designed to allow people with health insurance to put money aside for qualified medical expenses. HSAs are designed for those who have a high-deductible health plan (HDHP). The money you put into an HSA or FSA can be used tax-free to pay for certain out-of-pocket healthcare costs as they arise. If you are enrolled in one of these programs, your contributions to your account will also show up on your paycheck.

How to Get a Copy of Your Pay Stub

If you don’t have your pay stub, they are generally easily accessible. In most cases, you can retrieve them digitally by logging into the company payroll website. You were likely given access to it along with login information when you were initially hired. 

If you are unsure about login information or where to find a pay stub, you can ask your manager or someone in the human resources department to assist you. They will likely provide you with online access or give you physical copies of the pay stubs for any given pay period. 

If you are a government employee receiving payment from the state, you can often request copies of pay stubs directly from the state government website. In New York, for example, you just need to input some personal information, as well as the pay period you are asking for.

The Bottom Line

A pay stub is a tool you can use to understand how much money you have coming in and where your money is going. Understanding and reviewing the elements of your pay stub from a young age is important to establish strong financial habits.

Pay stubs in the U.S. vary according to how they are generated, but most contain a number of key features, including your pay, taxes, and deductions. It’s important to ensure that this information is correct, but not enough people make an effort to do so. Doing your own calculations—or verifying the accuracy of those performed by the IRS—can save you (or your employer) from making a costly mistake.