How to Read Your US Paycheck: FICA, Federal & State Withholding

Why your paycheck is more complex than the take-home number

A typical US paycheck stub has 15–25 line items. Most readers look at two — gross pay and net pay — and treat everything in between as a black box. That works fine until you change jobs, your withholding looks wrong, or you spot a deduction you don’t recognise. This guide walks every line through in the order it appears on a typical stub, so you can decode your own and verify it’s correct.

A paycheck splits into three buckets that always appear in the same order: earnings (what you earned), deductions (what’s taken out), and net pay (what’s left). Within deductions, there’s a further split between pre-tax deductions (which reduce the base for tax calculations) and post-tax deductions (which come out after tax). Order matters: pre-tax items go first, then tax is calculated, then post-tax items come out.

Earnings section

The top block lists everything you earned this pay period and year-to-date (YTD).

Regular pay: salary or hourly base.
Overtime: 1.5× rate for hours worked over 40/week under the Fair Labor Standards Act for non-exempt employees.
Bonus / commission: usually shown on a separate line for clarity, and often taxed differently for withholding purposes (more below).
Holiday / PTO: paid time off; just regular pay in a different bucket.
Reimbursements: business expenses repaid to you, usually non-taxable if accountable plan rules are met.
Gross pay: sum of all earnings for the period.

If you receive equity compensation (RSUs vesting, ISO/NSO exercises), the taxable value lands in your earnings section too — often as a separate “Imputed income” or “RSU income” line. The cash didn’t actually go into your paycheck, but the income did, which is why your W-2 gross can exceed the cash gross-pay-YTD on your final pay stub.

Pre-tax deductions

These come out before tax is calculated, so they reduce your taxable wages.

401(k) / 403(b) (pre-tax / traditional). Reduces both federal income tax and state income tax (in most states). Note: it doesn’t reduce FICA — see below.
Health insurance premiums (Section 125 cafeteria plan deductions). Reduces federal, state and FICA — full triple shield, which is why employer-sponsored health insurance is so tax-efficient.
HSA contributions through payroll. Same triple shield — reduce federal, state and FICA. (HSA contributions made directly outside payroll only reduce federal income tax, not FICA. This is one reason payroll-routed HSA contributions are preferred.)
FSA contributions (Healthcare FSA, Dependent Care FSA). Same triple-shield treatment as HSA.
Commuter benefits (transit / parking, $325/month limit each in 2026). Same triple shield up to the monthly limit.
Pre-tax disability or life insurance premiums (depends on plan structure).

Each pre-tax line is shown both for the period and YTD. The YTD figure for 401(k) is particularly useful — it tells you exactly how close you are to the annual limit ($24,500 in 2026 for under-50s).

Tax withholding

After pre-tax deductions, withholding is calculated on the remaining “taxable wages”. Three (sometimes four) tax lines appear:

Federal income tax (FIT)

The amount your employer is sending to the IRS based on your W-4. The W-4 doesn’t ask for a “number of allowances” anymore — that system was replaced in 2020 with a worksheet that asks for filing status, dependents, additional income, and other deductions. Your employer’s payroll system uses those inputs and the IRS withholding tables to compute the per-period withholding.

The federal withholding is an estimate. Your actual tax liability is calculated annually on Form 1040 using the brackets explained in 2026 federal tax brackets. If the W-4 is set correctly, year-end reconciliation produces a small refund or small amount due. If it’s off, you get a large refund (over-withheld) or owe (under-withheld). Use the IRS Tax Withholding Estimator to check your W-4 if your situation has changed.

A flat 6.2% of wages up to the Social Security wage base. The 2026 wage base is $176,100. Once your YTD Social Security wages hit the cap, this line disappears for the rest of the year. (You’ll see it return to zero on your stub when you cross.)

Social Security tax isn’t reduced by traditional 401(k) contributions but is reduced by Section 125 cafeteria-plan deductions (health insurance, HSA, FSA, commuter benefits). The employer pays an additional 6.2% matching share — that’s part of “FICA” on the employer side and is not deducted from your check.

If you work for two employers in the same year and your combined wages exceed the SS wage base, you’ll over-pay Social Security tax across the two jobs. You don’t get a refund from the employers — you claim it on Schedule 3 of your federal return at year-end.

Medicare tax

A flat 1.45% of all wages, no cap. Like Social Security, the employer pays a matching 1.45%.

If your YTD wages from a single employer exceed $200,000, the Additional Medicare Tax of 0.9% kicks in (employee only — no employer match). For high earners with both spouses working, the joint household threshold is $250,000, which means a married couple with $130,000 each at one employer would individually trigger no Additional Medicare withholding (each below $200k), but as a couple their combined wages would owe $0.9% on the portion above $250,000. The reconciliation happens via Form 8959 on the joint 1040.

State income tax

If you live and work in a state with income tax, withholding for that state appears as a separate line. Some local jurisdictions (NYC, certain Ohio cities, Philadelphia) also withhold a local tax — that’s a fourth line on stubs in those areas.

Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. If you live in one of these and work in one of these, no state withholding line appears. Working in a state different from your residence triggers cross-border rules — usually you withhold to the work state and get a credit at year-end on your home state return.

Post-tax deductions

After taxes, additional deductions can pull from net pay:

Roth 401(k): contributions are taken after tax. Shows up as a “401(k) Roth” or similar line. Unlike traditional 401(k), Roth contributions don’t reduce taxable wages — they reduce net pay only.
Post-tax insurance (some disability, some life): deducted after tax. Worth a separate review — pre-tax disability premiums mean taxable benefits if you ever collect; post-tax premiums mean tax-free benefits. The latter is often the better trade-off.
Wage garnishments: child support, tax levies, defaulted student loans. Court- or IRS-ordered, and the employer is legally required to comply.
Roth IRA payroll deduction (if your employer offers one): automatic transfer to a Roth IRA account, taken post-tax. Less common than 401(k) deductions.
Charitable giving via payroll: some employers offer “give-as-you-earn” deductions to a workplace giving programme. Donation-receipt treatment depends on whether the program qualifies for charitable deduction status.

Year-to-date totals — what to check

The YTD column is more useful than the current-period column. Things to verify each quarter:

YTD 401(k) vs annual limit: $24,500 in 2026 (under 50). If you’re targeting the max, divide by 12 (or 26 for biweekly) to find your per-period rate.
YTD HSA vs annual limit: $4,400 self-only / $8,750 family in 2026.
YTD FSA: $3,300 healthcare FSA / $5,000 dependent care FSA (2026). FSAs are use-it-or-lose-it; track the balance carefully near year-end.
YTD Social Security: stops at $176,100 of YTD SS wages. Higher earners can budget for the boost in take-home pay after crossing.
YTD federal income tax: divide by YTD taxable wages → that’s your effective federal withholding rate. If it looks wildly different from last year’s effective rate on your 1040, the W-4 may be off.

Use the paycheck calculator to verify the per-period numbers match what you’d expect.

Worked example: a typical biweekly paycheck

A single filer earning $80,000, contributing 10% to a traditional 401(k), with $200/period for health insurance and $50/period for HSA via payroll:

Gross pay: $80,000 / 26 = $3,077.
401(k) pre-tax: $3,077 × 10% = $307.70.
Health insurance: $200.
HSA: $50.
Taxable wages for federal income tax / state tax: $3,077 − $307.70 − $200 − $50 = $2,519.30.
Taxable wages for Social Security / Medicare: $3,077 − $200 − $50 = $2,827 (401(k) doesn’t reduce FICA).
Federal income tax withholding (single, no dependents, standard W-4): roughly $238.
Social Security: $2,827 × 6.2% = $175.27.
Medicare: $2,827 × 1.45% = $40.99.
State income tax (assume 4%): $2,519.30 × 4% = $100.77.
Net pay: $3,077 − $307.70 − $200 − $50 − $238 − $175.27 − $40.99 − $100.77 ≈ $1,964.

The biweekly take-home is therefore about 63.8% of gross. The other 36% is split roughly evenly between pre-tax retirement/benefit savings and tax/withholding — a common ratio for a mid-income, mid-savings employee.

Frequently asked questions

Why is my Social Security tax higher than it was last year? The Social Security wage base rises each year with average wage growth — it was $168,600 in 2024, $176,100 in 2026. If you earn above the cap, the dollar amount rises in lockstep with the cap. If you earn below the cap, the tax is just 6.2% of your wages — unchanged.

My bonus paycheck withheld 22% federal — was that right? The IRS sets a 22% supplemental withholding rate for non-regular wages (bonuses, commissions, severance) up to $1m per year. Above $1m, the rate is 37%. The 22% is a withholding rate, not your final tax liability. If your marginal rate is 12%, you’ll get the over-withholding back as a refund. If it’s 32%, you’ll owe more at year-end.

Why does my Roth 401(k) contribution not reduce my taxable wages? Roth 401(k) is funded with after-tax money. Your federal taxable wages on box 1 of your W-2 don’t reflect Roth contributions because tax is paid now, not later. (Traditional 401(k), by contrast, reduces box 1 because tax is deferred to retirement.)

I see two different gross-pay numbers on my W-2 at year-end — why? Three figures matter: box 1 (federal taxable wages, after pre-tax 401(k) and Section 125), box 3 (Social Security wages, after Section 125 but not 401(k), capped at the wage base), and box 5 (Medicare wages, after Section 125 but not 401(k), no cap). The three numbers reflect the different tax bases for each withholding type.

Can I change my W-4 mid-year? Yes — any time. Submit a new W-4 to your payroll team and it takes effect on the next payroll run. If you spot a withholding error mid-year, change the W-4 immediately and use the IRS Tax Withholding Estimator to set the right “additional withholding” amount for the rest of the year.

Authoritative sources: IRS Publication 15-T (Federal Income Tax Withholding) and IRS Tax Withholding Estimator.