You earn a certain salary, but the amount that lands in your bank account is noticeably smaller. Your pay stub explains exactly where the difference went. Here's how to read it.
Gross pay vs. net pay
Gross pay is what you earned before anything is taken out. Net pay — your "take-home" — is what's left after deductions. The gap between them is the sum of taxes and other withholdings below.
The taxes
- Federal income tax — withheld based on the W-4 you filled out.
- State & local income tax — if your state or city has one.
- Social Security (FICA) — 6.2% of wages, up to an annual cap.
- Medicare — 1.45% of wages, no cap.
Social Security and Medicare are often grouped as FICA. These are mandatory and fund those federal programs.
The other deductions
Beyond taxes, you'll often see:
- Health/dental/vision insurance premiums (usually pre-tax)
- 401(k) or retirement contributions
- HSA/FSA contributions
- Other items like life insurance or commuter benefits
Many of these are pre-tax, meaning they lower your taxable income — a hidden benefit.
What "YTD" means
Most stubs show two columns: this pay period and YTD (year-to-date), the running total for the year. YTD is useful for checking that your withholding is on track and for verifying your W-2 later.
The bottom line
Your take-home is smaller because taxes (federal, state, FICA) and benefits come out first. If a number ever looks off — especially a sudden change in tax withheld — it's worth asking your HR or payroll team.
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