I'm not proud of this, but I didn't really read my pay stub for the first three years of my career. I knew the number that hit my checking account and that was good enough. Then a friend pointed out I'd been overpaying for a benefit I wasn't using. That was $78 a month for two years. $1,872 gone.
Your pay stub is a receipt that shows exactly where your money went before you got it. Read it.
Gross Pay vs. Net Pay
Gross pay is what you actually earned — your salary or hourly rate times hours worked before anything is taken out. If you make $65,000/year paid bi-weekly, your gross per check is $2,500.
Net pay is what lands in your bank account after all deductions. Most people focus only on this number. The space between gross and net is where your money is being allocated — some correctly, some potentially incorrectly.
The Federal Tax Lines
Federal Income Tax (FIT)
What the federal government withholds for income taxes. The amount is determined by your W-4 form, your filing status, and any extra withholding you requested. This is an estimate; you reconcile with the IRS when you file your return.
Social Security Tax
6.2% of gross wages (up to $176,100 in 2025). This funds your future Social Security benefits. Your employer matches this 6.2%.
Medicare Tax
1.45% of all wages (no cap). Employer also matches. If you earn over $200,000, an extra 0.9% Medicare surtax kicks in.
Together, Social Security and Medicare taxes are called FICA. Combined employee rate: 7.65%.
State and Local Taxes
If you live in a state with income tax, you'll see a state withholding line. Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. Local taxes appear if your city or county charges them (Philadelphia, New York City, and others do).
Pre-Tax Deductions (The Good Ones)
These come out before your taxable income is calculated, which means they reduce what you're taxed on:
- 401(k) / 403(b): Retirement contributions. Traditional contributions reduce taxable income; Roth contributions don't.
- Health insurance premiums: Usually pre-tax through an employer plan
- Dental and vision premiums: Same — pre-tax
- FSA/HSA contributions: Pre-tax, reduces FICA taxes too when done through payroll
- Life insurance (employer-sponsored): Often pre-tax up to $50,000 of coverage
- Commuter benefits: Transit passes, parking (up to $325/month, pre-tax)
Every dollar in pre-tax deductions saves you your marginal tax rate. At 22% federal + 5% state, a $200/month pre-tax health premium saves you $54/month in taxes compared to paying it post-tax.
Post-Tax Deductions
These come out after taxes are calculated and don't reduce your taxable income:
- Roth 401(k) contributions
- Supplemental life insurance above $50,000
- Some disability insurance premiums
- Wage garnishments (child support, debt collection)
What to Actually Check Each Pay Period
Don't just verify the net pay number. Check:
- Hours worked (if hourly) — math errors happen
- 401(k) contribution percentage — verify it's what you elected
- Benefits deductions — confirm you're not paying for benefits you waived
- Federal withholding — if it seems too low, you might have a surprise tax bill in April
- YTD totals — year-to-date columns show your cumulative picture
When to Update Your W-4
Got married, had a child, or took on a second job? Update your W-4 with HR. These life changes significantly affect how much tax you owe, and your withholding needs to reflect them. The IRS has a Tax Withholding Estimator at irs.gov that tells you exactly what to enter.
The Bottom Line
Your pay stub is a detailed map of where your money goes. Reading it takes four minutes. Errors do happen — in health insurance deductions, contribution amounts, benefits enrollment. You won't catch them if you never look. Pull up your next pay stub, go through each line, and verify everything is what you actually elected. Boring task. Occasionally saves you real money.
