Your paycheck represents your earned wages minus various federal, state, and local taxes plus other deductions. The difference between gross and net pay often surprises people, with 20-35% or more disappearing to taxes and deductions before money reaches your bank account. This guide breaks down every component affecting your paycheck so you know exactly where your money goes.
FICA Taxes: Social Security and Medicare
FICA taxes appear on every paycheck, funding Social Security and Medicare with mandatory contributions from all employees, as set out by the Social Security Administration and the IRS:
| FICA Component | Rate | 2026 Wage Base / Threshold |
|---|---|---|
| Social Security | 6.2% | $184,500 |
| Medicare | 1.45% | No cap |
| Additional Medicare | 0.9% | Above $200,000 (single) / $250,000 (MFJ) |
On a $2,885 paycheck, Social Security tax is $178.87 ($2,885 × 0.062). Once year-to-date earnings exceed the $184,500 wage base, Social Security withholding stops for the remainder of the year — high earners typically see this happen in the final months of the year, creating noticeably higher take-home pay on year-end paychecks.
Medicare tax on that same $2,885 paycheck is $41.83 ($2,885 × 0.0145), applying to every dollar with no wage cap. Additional Medicare tax kicks in once year-to-date wages cross $200,000, regardless of filing status or spouse's income — high-earning married couples filing jointly may owe this tax at filing time even if neither spouse individually exceeds $200,000.
Total FICA withholding is 7.65% (6.2% + 1.45%) on a $2,885 paycheck, equaling $220.70. Employers pay matching amounts, doubling the total contribution to Social Security and Medicare, but only the employee portion appears on your pay stub.
Decoding Your Pay Stub
Pay stubs contain crucial information beyond just your net pay amount. Understanding each section helps verify accuracy and track year-to-date figures.
Earnings section shows gross pay for the period plus year-to-date totals. Verify that gross pay matches your salary calculation or hourly rate times hours worked. For salaried employees, this should be consistent. For hourly employees, compare hours shown to your timesheets.
Tax withholdings list federal, state, and local taxes deducted. Check that these align with expectations based on your W-4 and earnings. Year-to-date figures should track reasonably toward projected annual liabilities. Mid-year federal withholding should approximate half your estimated annual tax.
Deductions section itemizes benefits and other deductions. Review health insurance, retirement contributions, and other deductions for accuracy. Ensure elected contribution amounts match what's being deducted. Year-to-date figures help track annual limits like the $23,000 401(k) deferral limit.
Employer contributions sometimes appear showing employer-paid benefits like retirement matching, health insurance contributions, or life insurance. These don't affect net pay but represent total compensation beyond salary.
Net pay is the final amount deposited into your account or issued as a check. This should match bank deposits precisely. Discrepancies require immediate investigation with payroll.
Year-to-date totals across all categories help with tax planning and benefits tracking. As year-end approaches, review whether you'll hit contribution limits, whether withholding is adequate, and whether you're maximizing employer matches.
Common pay stub errors include incorrect tax filing status, wrong deduction amounts, missing employer matching contributions, or incorrect hours for hourly employees. Review every pay stub, particularly the first few from a new employer or after changes to benefits or W-4 elections.