How to Read a Pay Stub: Every Line Decoded

A pay stub is the most frequently received financial document in American life and the least frequently explained. Most people check one number, confirm it is roughly what they expected, and file it. The rest of the page summarizes how your compensation is taxed, what your benefits cost, and whether payroll is making an error against you.

The layout differs by employer and payroll provider, but the structure is always the same: gross earnings at the top, three groups of subtractions, net pay at the bottom, and a year-to-date column alongside. Once you know what belongs in each group, any stub becomes readable.

What follows is a line-by-line decode with a full worked sample. Every dollar figure is illustrative unless it is a statutory 2026 figure, which is noted where it appears.

#Gross pay, net pay, and the gap between them

Gross pay is everything you earned in the period before anything is removed: base salary or hourly wages, overtime, shift differentials, commission, bonuses, and certain reimbursements. Net pay -- often labeled "take-home" or "net check" -- is what actually reaches your bank account.

Between the two sit three distinct categories, and the order matters because it changes the tax.

1. Pre-tax deductions, which reduce the wage figure that taxes are calculated on.
2. Taxes, calculated on the reduced figure.
3. Post-tax deductions, taken from what is left and having no effect on tax.

That ordering is the single most useful thing to understand about a pay stub. A dollar routed through a pre-tax deduction costs you less than a dollar of take-home pay, because the tax that would have applied to it never applies. A dollar routed through a post-tax deduction costs a full dollar.

#An annotated sample pay stub

Suppose a salary of $78,000 paid biweekly, so 26 checks of $3,000. This is the 14th check of the year. The employee contributes 6% to a traditional 401(k), pays medical, dental and health savings account amounts through a cafeteria plan, contributes to a Roth 401(k) after tax, and has employer-paid group term life insurance above $50,000 of coverage.

Worked example: Follow the arithmetic. Gross $3,000 plus $9.60 imputed income is $3,009.60. Pre-tax deductions total 180 + 145 + 100 + 12 = $437, so federal taxable wages are 3,009.60 - 437 = $2,572.60. FICA taxable wages add the 401(k) back: 2,572.60 + 180 = $2,752.60. Social Security is 6.2% of 2,752.60 = $170.66; Medicare is 1.45% of 2,752.60 = $39.91. Taxes total 223 + 170.66 + 39.91 + 109.34 = $542.91. Post-tax deductions total 60 + 8.50 + 10 = $78.50. Net is 3,000 - 437 - 542.91 - 78.50 - 9.60 = $1,931.99.

The take-home rate here is 1,931.99 / 3,000, or about 64% of gross. That figure is why budgeting from gross income produces plans that fail in the second month. Any plan built on take-home pay, such as a first budget, needs the net number.

#Pay period, pay date, and the 26 versus 24 paycheck problem

The pay period is the range of work being paid for. The pay date is when funds actually transfer, usually later. A period ending on the 15th paid on the 22nd is normal, and that lag matters when you leave a job.

Frequency is where budgets break. There are four common ones, and two of them are routinely confused.

• Weekly: 52 checks a year.
• Biweekly: every two weeks, 26 checks. Two months each year contain three checks.
• Semi-monthly: twice a month on fixed dates, 24 checks. Every month contains exactly two.
• Monthly: 12 checks.

Biweekly and semi-monthly are frequently confused and produce different amounts. On $78,000 a year, biweekly pays $3,000 per check and semi-monthly pays $3,250. Annually they are identical. Monthly, they are not: the semi-monthly employee receives $6,500 every month, while the biweekly employee receives $6,000 in ten months and $9,000 in two.

The workable approach for biweekly pay is to build the monthly plan on two checks and assign the third check in those two months in advance -- to an annual premium, a debt payment, or a savings target, which is the technique described in sinking funds. Budgeting on an average of 2.17 checks a month is arithmetically correct and reliably fails, because the shortfall lands in the ten normal months.

#Hours, rates and overtime

Hourly employees see a line for each rate paid: regular hours at a base rate, overtime hours at a premium, and sometimes shift differential, holiday, or on-call rates. Check the total hours against your own record, particularly if the period spans a schedule change.

Overtime under federal law is generally one and a half times the regular rate for hours over 40 in a workweek, for employees who are not exempt. State law sometimes requires more, such as daily overtime thresholds. The subtlety is the phrase "regular rate", which is not simply your base rate.

Worked example: An employee earns $24 an hour and works 46 hours in a week, also earning a $100 nondiscretionary production bonus for that week. Straight-time pay for all hours is 46 x 24 = $1,104. Adding the bonus gives $1,204 of total straight-time compensation. The regular rate is 1,204 / 46 = $26.17. Overtime requires an extra half of the regular rate for the 6 excess hours: 6 x $13.09 = $78.52. Total pay is 1,104 + 100 + 78.52 = $1,282.52. If payroll had used the base rate alone, the overtime premium would have been 6 x $12 = $72, understating pay by $6.52.

That understatement compounds across a year for anyone earning regular production or attendance bonuses.

#Pre-tax deductions and why they shrink taxable wages

Pre-tax deductions come out of gross pay before tax is calculated, so they reduce the wage base rather than the tax bill directly. The saving equals the deduction multiplied by your marginal rate.

The important distinction, and the one that confuses almost everyone, is that not all pre-tax items are pre-tax for the same taxes.

• Traditional 401(k), 403(b) and 457 deferrals reduce federal and usually state taxable wages, but not Social Security and Medicare wages. You pay FICA on money you defer. That is why the sample stub shows two different taxable wage figures. The 2026 elective deferral limit is $24,500, with an $8,000 catch-up from age 50 and $11,250 for ages 60 to 63. The mechanics are covered in how a 401(k) works.
• Section 125 cafeteria plan items -- most medical, dental and vision premiums, health FSA, dependent care FSA, and HSA contributions made through payroll -- reduce federal, state and FICA wages. That makes payroll HSA contributions slightly more efficient than contributing directly and deducting later, because the direct route does not avoid FICA.
• Commuter benefits for qualified transit and parking are also generally pre-tax for both.

2026 figures worth knowing: the HSA limit is $4,400 self-only and $8,750 family, the health FSA limit is $3,400 with up to $680 carryover, and the dependent care FSA limit is $7,500 for a family.

#Federal income tax withholding and the W-4

Federal withholding is not your tax. It is an estimate produced by a formula your employer runs, using the information on your Form W-4 and the assumption that this pay period is representative of your whole year.

The current W-4 does not use allowances. It asks for filing status, whether you hold multiple jobs or your spouse works, dependent credits, other income, other deductions, and any extra amount you want withheld per period. The formula annualises your taxable wages, applies the standard deduction for your filing status, runs the result through the brackets, subtracts credits, and divides by the number of pay periods.

Two consequences follow. A bonus or unusually large commission period makes withholding behave oddly for that check, because the formula assumes the higher amount continues all year. Supplemental wages are often withheld at a flat statutory percentage instead, which is a withholding convention rather than a separate tax rate.

The most common cause of a large April balance due is a two-earner household where both W-4s are filed as though each job were the only one. Each formula applies a full standard deduction and starts at the lowest bracket, so combined withholding falls short. The W-4 has a step for this, and the IRS publishes an estimator that produces the extra per-period amount.

#FICA: Social Security and Medicare, separately

FICA is two taxes, and stubs that combine them into one line make errors harder to spot.

Social Security is 6.2% of Social Security wages, up to an annual wage base. For 2026 the taxable wage base is $184,500, so the maximum employee Social Security tax for the year is 184,500 x 0.062 = $11,439. Once your year-to-date Social Security wages pass the base, the deduction stops and your take-home rises, which surprises high earners every autumn. Your employer pays a matching 6.2%.

Medicare is 1.45% with no wage cap, matched by your employer. An Additional Medicare Tax of 0.9% applies to wages above a threshold, and employers are required to begin withholding it once your wages with that employer exceed $200,000 regardless of your filing status, which can result in over- or under-withholding that is reconciled on your return.

If you change employers mid-year, each restarts the wage base independently, so you can be over-withheld across two jobs. The excess is claimed as a credit on your return rather than refunded by either employer.

#State, local and other mandatory withholding

State income tax appears on most stubs. A minority of states have no wage income tax at all; several use a flat rate; the rest use brackets and their own definition of taxable wages, which may or may not match the federal one.

Local taxes exist in some jurisdictions: city or county income tax, school district tax, and occupational or head taxes assessed as a flat amount. If you live and work in different jurisdictions, both may appear, sometimes with a credit mechanism.

Several states also require employee contributions shown as separate lines: state disability insurance, paid family and medical leave, or unemployment. These are mandatory rather than elected.

#Post-tax deductions, employer contributions and imputed income

Post-tax deductions come out after tax and change nothing about your taxable wages: Roth 401(k) contributions, supplemental life insurance above the pre-tax portion, union dues, charitable payroll giving, loan repayments to a 401(k), garnishments, and after-tax disability premiums.

One of those involves a deliberate trade-off. Paying disability premiums with after-tax dollars generally means any benefit received is not taxable, while pre-tax premiums generally make benefits taxable.

Employer contributions often appear in a separate block marked "employer paid" or "memo". Employer 401(k) match, the employer share of health premiums, employer HSA contributions, and the employer half of FICA are shown for information. They are not deducted from your pay and they do not affect net. They are useful because they show total compensation, which is usually 20% to 35% above salary.

Imputed income is the odd one. Certain non-cash benefits are taxable, so their value is added to your wages for tax purposes and then subtracted again as a non-cash line so that net pay is unaffected. The most common is employer-paid group term life insurance above $50,000 of coverage. Others include personal use of a company vehicle, some gift cards, and coverage for a domestic partner who is not a tax dependent. You never receive the cash, but you pay tax on it, which is why net pay can fall slightly with no change in salary or elections.

#Every common line item, decoded

#Year-to-date columns and the checks they enable

The year-to-date column is the part almost nobody uses, and it is the part that catches errors. Four checks take about three minutes.

1. Rate check. Divide year-to-date Social Security tax by year-to-date Social Security wages. It should be almost exactly 0.062 until you reach the wage base. Do the same for Medicare against 0.0145. A deviation means a wage-base or classification error.
2. Retirement pacing. Divide your year-to-date 401(k) deferral by the number of checks so far, then multiply by your total checks for the year. If that projects above $24,500 for 2026, some employers stop your contributions early and you may lose match in the remaining periods.
3. Deduction continuity. Compare each year-to-date deduction against per-period amount times periods elapsed. A mismatch usually means a period was skipped or double-counted.
4. Reconciliation against the W-2. Box 1 should approximate year-to-date gross plus imputed income minus pre-tax income-tax-exempt items, and Box 3 should approximate the Social Security wage figure. If the final stub and the W-2 disagree, ask before filing.

Worked example: In the sample stub, year-to-date Social Security wages are $38,536.40 and year-to-date Social Security tax is $2,389.24. Dividing gives 0.06200. Medicare: 558.74 / 38,536.40 = 0.01450. Both correct. If the Social Security figure had come out at 0.0578, something is being excluded from the Social Security wage base that should not be.

#The errors worth looking for

Payroll errors are usually systematic, so one wrong parameter repeats every period until someone notices.

• Overtime calculated on the base rate rather than the regular rate when bonuses are paid.
• A benefit election that started or stopped on the wrong date after open enrollment.
• A pay rate that did not update after a raise, or used the wrong effective date.
• Pre-tax and post-tax coding reversed on a benefit, which quietly overstates your tax.
• A retirement deferral percentage applied to the wrong earnings base, such as excluding bonuses when the plan includes them.
• A state or local tax withheld for a jurisdiction you no longer work in after a move or a change to remote work.
• A garnishment taken above the legal limit for your disposable earnings.

Keep every stub for the year and the final one indefinitely. It is the primary evidence in any dispute.

#If your withholding is badly wrong

Two failure modes exist, and they are not symmetrical.

Under-withheld means an unexpected balance at filing, potentially with a penalty. The remedy is a revised W-4 with an additional per-period amount in the extra withholding field. Because part of the year is gone, the catch-up must be concentrated: short by $1,800 with 9 checks left is $200 a check.

Over-withheld means a large refund, which is a return of your own money that was unavailable all year. A $3,600 refund is $300 a month sitting elsewhere, and redirecting it into an emergency fund as it is earned is generally more useful.

The practical tool is the IRS withholding estimator, which takes year-to-date figures from a recent stub and returns a specific W-4 entry. Rerun it after any raise, job change, marriage, birth, or change in a spouse's employment.

#What the usual advice gets wrong

"Your withholding equals your tax rate." It does not. Withholding is an annualised estimate driven by your W-4, and a single check can be withheld at a rate far from your actual average rate.

"Getting a big refund means you did well." A refund is an overpayment being returned without interest. Neither a large refund nor a large balance due is a sign of skill; both indicate the estimate was off.

"Pre-tax always beats post-tax." Pre-tax defers tax rather than eliminating it, and for retirement contributions the comparison depends on your rate now against your expected rate later, which is the argument set out in traditional versus Roth accounts.

"Bonuses are taxed at a higher rate." They are withheld at a flat supplemental rate. The actual tax is settled on your return.

"401(k) contributions reduce all your taxes." They reduce income tax but not FICA. Cafeteria plan benefits reduce both, which is why the two taxable wage figures differ.

"Net pay is the number that matters for a mortgage." Lenders qualify on gross income, which is why an approval amount can look generous against the pay stub reality. That gap is the subject of what a house actually costs each month.