How to Read Your Paycheck: Every Line Item Explained (2026)

You work hard for your paycheck, but do you know where every dollar goes? Most Americans look at the "Net Pay" line and ignore everything above it. That's a costly mistake — understanding your pay stub can help you spot errors, optimize your withholding, and put more money back in your pocket. This guide walks through every section of a standard 2026 pay stub line by line.

Gross Pay vs. Net Pay: The Big Picture

The two most important numbers on any pay stub are Gross Pay and Net Pay. Gross pay is what you earned before any deductions. Net pay — often called take-home pay — is what actually hits your bank account after taxes and other withholdings are removed.

For a $75,000-a-year employee paid bi-weekly, gross pay per check is $2,884.62. After all federal, state, and FICA deductions, a typical net pay might be around $2,100–$2,200 — a difference of over $700 per paycheck.

Federal Income Tax Withholding

This is the largest deduction for most workers. Your employer uses the information on your W-4 form — your filing status, number of dependents, and any extra withholding you requested — to calculate how much to withhold each pay period.

In 2026, federal income tax uses progressive brackets ranging from 10% to 37%. The key point: you are not taxed at your top bracket rate on all your income. Only the income that falls within each bracket is taxed at that rate. The calculator on this site uses the exact 2026 IRS brackets (Rev. Proc. 2025-32) to give you an accurate estimate.

• 10% on income up to $11,925 (single) / $23,850 (MFJ)
• 12% on income $11,926–$48,475 (single)
• 22% on income $48,476–$103,350 (single)
• 24% on income $103,351–$197,300 (single)
• 32% on income $197,301–$250,525 (single)
• 35% on income $250,526–$626,350 (single)
• 37% on income above $626,350 (single)

Social Security & Medicare (FICA)

FICA stands for the Federal Insurance Contributions Act. These two taxes fund your future Social Security retirement benefits and Medicare health coverage. They are calculated as a flat percentage of your wages — not progressively like income tax.

• Social Security: 6.2% of wages up to the 2026 wage base of $176,100. Once you earn more than this, Social Security tax stops for the rest of the year.
• Medicare: 1.45% of all wages with no cap. High earners (over $200,000 single / $250,000 MFJ) pay an additional 0.9% Additional Medicare Tax.

Your employer pays a matching amount — an equal 6.2% for Social Security and 1.45% for Medicare — on top of your wages. That employer share does not appear on your pay stub but represents a real cost of employing you.

State Income Tax

Depending on where you live, a state income tax line may also appear on your pay stub. Nine states have no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. The remaining states have rates ranging from a flat 3% (e.g., Indiana) to over 13% (California's top bracket).

Some states use flat rates, others use progressive brackets similar to the federal system. Your employer typically calculates state withholding using state-issued withholding tables based on a state equivalent of the W-4.

Pre-Tax Deductions

Pre-tax deductions are contributions that are subtracted from your gross pay before taxes are calculated. This reduces your taxable income, which lowers all income-based taxes. Common pre-tax deductions include:

• 401(k) contributions: Up to $23,500 in 2026 ($31,000 if age 50+).
• Health insurance premiums: Your share of employer-sponsored health, dental, and vision coverage.
• Health Savings Account (HSA): Up to $4,300 for self-only or $8,550 for family coverage in 2026.
• Flexible Spending Account (FSA): Up to $3,300 for healthcare FSA in 2026.
• Dependent Care FSA: Up to $5,000 for qualified childcare expenses.

Post-Tax Deductions

Post-tax deductions come out after taxes are calculated. They do not reduce your taxable income. Common examples include Roth 401(k) contributions (after-tax for tax-free growth), union dues, life insurance (above the employer-sponsored limit), and wage garnishments. While these reduce your net pay, they don't provide the immediate tax savings that pre-tax deductions do.

Year-to-Date (YTD) Figures

Most pay stubs also show Year-to-Date (YTD) columns alongside each current-period figure. These running totals show how much you've earned and how much has been withheld from January 1st through your current pay date. YTD figures are essential for:

• Tracking when you'll hit the Social Security wage base and stop paying that 6.2%.
• Verifying your W-2 at tax time will match your records.
• Spotting if your employer has made a withholding error mid-year.

A complete worked example: Sarah's bi-weekly pay stub

Let's walk through a realistic 2026 pay stub for Sarah, a salaried employee earning $72,000/year, paid bi-weekly, filing single with one dependent, contributing 6% to her 401(k), and enrolled in her employer's health plan.

Sarah earns $2,769 but takes home $1,899 — a difference of $870 per check. Of that $870, $311 goes to retirement savings and health insurance (which she benefits from directly), and $559 goes to federal, state, and FICA taxes withheld on her behalf.

How overtime and bonus pay are taxed differently

Regular wages are withheld using your W-4 information. Overtime and bonuses are handled slightly differently and often cause confusion:

• Overtime pay: Treated as regular wages for withholding purposes. The extra income pushes your total earnings higher for that period, which can result in a larger federal withholding amount since the annualized projection of your wages appears higher.
• Supplemental wages (bonuses, commissions): The IRS allows employers to withhold at a flat 22% supplemental rate for federal income tax, regardless of your W-4. Some employers instead aggregate the bonus with your regular pay and withhold at the combined rate. The 22% flat rate is often higher than what you'd actually owe, leading to a refund at tax time.
• FICA on bonuses: Social Security and Medicare taxes apply to all supplemental wages the same as regular wages. There's no exception for bonuses.

How to spot pay stub errors

Payroll errors are more common than most employees realize. Here's what to check every pay period:

• Wrong pay rate or hours: Verify your gross pay equals your hourly rate multiplied by hours worked, or your annual salary divided by pay periods. Rounding errors and system glitches do occur.
• Social Security not stopping at the wage base: Once your YTD earnings exceed $176,100 in 2026, Social Security withholding must stop. If it continues, your employer is over-withholding and must correct it.
• Pre-tax deductions applied post-tax: If your 401(k) or health insurance appears in the "post-tax" section instead of pre-tax, you're paying taxes on income that should have been sheltered. This will overstate your W-2 at year-end and cause you to over-pay income tax.
• Incorrect W-4 applied: If you recently submitted a new W-4 and your withholding hasn't changed, verify with payroll that the update was processed. It should take effect by the next payroll cycle.
• Missing employer contributions: Your pay stub may show employer 401(k) match or HSA contributions. If your employer promised a match and it's not appearing, follow up with HR.

Frequently asked questions

Why is so much more taken out of my first paycheck of the year?

Your first paycheck of the year doesn't have more withheld than others — but it might feel that way if your last paycheck of the prior year benefited from Social Security hitting the wage cap. Once the new year begins, Social Security withholding restarts at 6.2% from dollar one. Also, if you changed jobs or got a raise, your new higher wage is annualized for withholding purposes starting fresh.

What does "imputed income" mean on my pay stub?

Imputed income represents the taxable value of certain non-cash benefits your employer provides. The most common example is employer-paid life insurance above $50,000 in coverage — the IRS requires the value of coverage above that threshold to be included in your taxable wages, even though you never receive cash. Group term life insurance, personal use of a company car, and some fringe benefits can create imputed income lines on your pay stub.

Can I change my W-4 at any time?

Yes — you can submit an updated W-4 to your employer at any time during the year. The change typically takes effect within one or two pay cycles. There is no limit on how many times you can update your W-4. Life events that commonly warrant a W-4 update include marriage, divorce, a new child, a side income, or a significant change in itemized deductions.