How to Read Your Pay Stub in 2026: Understanding Every Deduction

Anatomy of a Pay Stub

Every pay stub follows the same basic structure: it starts with your gross earnings, subtracts various deductions, and arrives at your net pay — the amount deposited into your bank account. Understanding each component helps you verify that your employer is withholding the correct amounts and ensures you are not overpaying taxes.

The top of your pay stub shows your gross pay for the period. If you are salaried and paid biweekly, this is your annual salary divided by 26. For a $100,000 salary, each biweekly gross pay is $3,846.15. If you are hourly, it shows hours worked multiplied by your hourly rate, with overtime listed separately at 1.5× the regular rate.

Below gross pay, you will find two categories of deductions: pre-tax and post-tax. Pre-tax deductions are subtracted before taxes are calculated, reducing your taxable income. These typically include 401(k) or 403(b) retirement contributions, health insurance premiums, HSA contributions, and FSA contributions. Post-tax deductions are subtracted after taxes and include items like Roth 401(k) contributions, life insurance premiums exceeding $50,000 in coverage, union dues, and wage garnishments.

The tax section shows each mandatory tax withheld: federal income tax, state income tax (if applicable), Social Security tax, and Medicare tax. Some localities also withhold city or county income tax.

Finally, the net pay line shows what you actually receive. On most pay stubs, you will also see year-to-date (YTD) totals for each category, which help you track your annual earnings and deductions. Generate a sample pay stub for any salary using the WageEngine payslip tool.

Federal Income Tax Withholding

Federal income tax is typically the largest single deduction on your pay stub. The amount withheld depends on your gross pay, filing status, number of allowances claimed on Form W-4, and any additional withholding you have requested.

Your employer uses IRS withholding tables to estimate how much federal tax you owe based on each paycheck. The system annualizes your per-paycheck earnings to determine your expected tax bracket, then withholds proportionally. This means the withholding percentage stays roughly consistent across paychecks for salaried workers, but can vary for hourly workers whose hours fluctuate.

If your withholding is too high, you will receive a refund when you file your annual tax return. If it is too low, you will owe additional tax. The ideal withholding results in neither a large refund (which means you gave the government an interest-free loan) nor a large balance due (which may trigger underpayment penalties).

You can adjust your withholding by submitting a new Form W-4 to your employer at any time. Common reasons to adjust include getting married, having a child, starting a side job, or realizing your refund or balance due was too large. The IRS provides a Tax Withholding Estimator tool on irs.gov to help you calculate the optimal W-4 settings.

To see how much federal tax applies to your specific income, use the WageEngine calculator. It shows the exact federal tax amount at any salary level, broken down by bracket. You can also review the 2026 federal tax brackets to understand which bracket your income falls into.

Social Security and Medicare (FICA)

FICA taxes fund Social Security and Medicare — the two federal social insurance programs. These deductions appear on every pay stub and are not optional.

Social Security tax is withheld at 6.2% of your gross wages up to the wage base limit of $176,100 in 2026. Once your year-to-date earnings exceed this threshold, Social Security withholding stops for the remainder of the year. If you earn $176,100 or more, you will notice your paychecks getting larger in the fall as the Social Security deduction disappears. Your maximum annual Social Security contribution is $10,918 (6.2% × $176,100).

Medicare tax is withheld at 1.45% of all gross wages with no cap. Unlike Social Security, Medicare has no wage base limit — you pay 1.45% on every dollar you earn. If your wages exceed $200,000 ($250,000 for married filing jointly), an Additional Medicare Tax of 0.9% applies to earnings above that threshold, bringing the total Medicare rate to 2.35% on high earnings.

Your employer pays a matching amount for both Social Security (6.2%) and Medicare (1.45%). This employer contribution does not appear on your pay stub but is part of your total compensation cost. The combined employer and employee FICA contribution is 15.3% of wages — the same rate that self-employed individuals pay as "self-employment tax."

On your pay stub, you might see these listed as "OASDI" (Old-Age, Survivors, and Disability Insurance — the official name for Social Security) and "HI" or "MED" (Hospital Insurance/Medicare). Some payroll systems combine them into a single "FICA" line. Year-to-date totals help you track when you are approaching the Social Security wage base limit.

State and Local Tax Deductions

If you live or work in a state with income tax, your pay stub will show state income tax withholding. The amount depends on your state's tax rates, your income level, and the allowances you claim on your state W-4 equivalent.

State income tax rates range from 0% (in the seven states with no income tax) to over 13% at the highest income levels. The most common range for a $75,000-$100,000 earner is 3% to 7% of gross income. California, New York, New Jersey, and Oregon have the highest effective rates at this income level, while flat-tax states like Colorado (4.4%), Illinois (4.95%), and Indiana (3.05%) are more moderate.

Some cities and counties impose their own income tax on top of state tax. The most notable are New York City (up to 3.876%), Philadelphia (3.75% for residents), and numerous Ohio cities. If you work in a city with local income tax, this will appear as an additional line on your pay stub.

Multi-state workers may see withholding for more than one state. If you live in New Jersey but commute to New York, your employer may withhold New York state tax on your wages. You would then file returns in both states, claiming a credit in your home state for taxes paid to the work state. Reciprocity agreements between some neighboring states simplify this — for example, Virginia and D.C. have reciprocity, so a D.C. resident working in Virginia only owes D.C. tax.

To see your exact state tax deduction at any income level, use the WageEngine state calculator. Select your state and enter your salary to see the precise breakdown.

Pre-Tax Deductions That Save You Money

Pre-tax deductions reduce your taxable income, meaning you pay less in income tax and sometimes less in FICA taxes. Understanding and maximizing these deductions is one of the most effective ways to increase your take-home pay.

Traditional 401(k) or 403(b) contributions are subtracted from your gross pay before federal and state income tax is calculated (but after FICA in most cases). If you contribute $500 per biweekly paycheck, your taxable income for that period drops by $500, saving you tax at your marginal rate. A worker in the 22% federal bracket and a 5% state bracket saves $135 per paycheck — meaning the $500 contribution only costs $365 in reduced take-home pay. The 2026 contribution limit is $23,500 (or $31,000 if you are 50+).

Health insurance premiums paid through employer-sponsored plans are almost always pre-tax. If your share of health insurance is $200 per paycheck, this reduces your taxable income by $200. Most employer plans are set up under Section 125 (cafeteria plan), which also exempts these premiums from FICA taxes — saving an additional 7.65%.

Health Savings Account (HSA) contributions are pre-tax and exempt from FICA if made through payroll deduction. The 2026 limits are $4,300 for individuals and $8,550 for families. HSAs offer a triple tax advantage: pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

Flexible Spending Accounts (FSAs) allow pre-tax contributions for healthcare expenses ($3,200 limit in 2026) or dependent care ($5,000 limit). Unlike HSAs, FSA funds generally must be used within the plan year or they are forfeited.

Commuter benefits may allow pre-tax deductions for transit passes or parking expenses, up to $325 per month for each in 2026.

Verifying Your Pay Stub Is Correct

Payroll errors are more common than most workers realize. Studies suggest that roughly 1 in 3 employers have made a payroll error at some point. Checking your pay stub each period takes only a few minutes and can catch mistakes that would otherwise cost you money.

First, verify your gross pay matches your expected earnings. For salaried workers, divide your annual salary by the number of pay periods (26 for biweekly, 24 for semimonthly, 12 for monthly). For hourly workers, multiply hours worked by your rate and verify overtime is calculated at 1.5× for hours above 40.

Second, check that pre-tax deductions match your elections. If you signed up for $500/paycheck in 401(k) contributions, that exact amount should appear. If you recently changed your health insurance plan, verify the new premium is reflected.

Third, compare federal tax withholding to your expectations. The WageEngine calculator can show you approximately what your per-paycheck federal tax should be at your income level. If your actual withholding is significantly different, you may need to update your W-4.

Fourth, verify FICA deductions. Social Security should be exactly 6.2% of your gross pay (after pre-tax deductions that are FICA-exempt). Medicare should be exactly 1.45%. If you have exceeded the Social Security wage base, verify that withholding has stopped.

Fifth, check year-to-date totals against your own records. YTD gross pay should be tracking toward your annual salary. YTD tax withholding should be on pace for your expected annual tax liability. Major discrepancies may indicate a withholding error that has been compounding over multiple pay periods.

Generate a reference pay stub for your salary using the WageEngine payslip tool and compare it to your actual pay stub to quickly identify any discrepancies.