Pay Stub Explained: What You're Actually Being Paid

Most people glance at the net pay number and move on. That's a mistake. Your pay stub is a detailed record of what you earned, what was taken out, and why — and errors happen more often than you'd think. Here's how to read every line.

Gross Pay vs. Net Pay

Gross pay is what you earned before anything is taken out. Net pay — the number that hits your bank account — is what's left after all deductions. The gap between the two is often surprising. On a $75,000 salary, your gross monthly pay is $6,250. Your net might be closer to $4,400 depending on your state, benefits elections, and retirement contributions.

This is why comparing salary vs. hourly pay requires looking at net numbers, not gross. The headline offer number and your actual take-home are two different things.

Federal and State Tax Withholding

Federal income tax is withheld based on your W-4 elections — your filing status (single, married, head of household) and any additional withholding you've requested. The amount isn't a flat percentage; it follows graduated brackets. Higher earners see a larger chunk withheld. Use the IRS tax withholding estimator to verify your elections are correct.

State income tax applies in most states (nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). If you work remotely and live in a different state than your employer, withholding can get complicated — check with your HR department.

FICA: Social Security and Medicare

• Social Security — 6.2%

  Withheld on earnings up to the annual wage base ($168,600 in 2024). Once you hit that ceiling, Social Security withholding stops for the rest of the year.

• Medicare — 1.45%

  No wage cap. High earners (over $200,000) also pay an additional 0.9% Medicare surcharge. Your employer matches both Social Security and Medicare contributions.

Pre-Tax Deductions

These come out before taxes are calculated, which means they reduce your taxable income — a genuine financial benefit.

• 401(k) contributions — your elected percentage, up to IRS limits ($23,000 in 2024)
• Health insurance premiums — your share of medical, dental, and vision coverage
• HSA/FSA contributions — health savings or flexible spending account elections
• Commuter benefits — pre-tax transit or parking contributions if your employer offers them

The value of pre-tax benefits is often underestimated. A $500/month health premium paid pre-tax saves you roughly $100–$175/month in taxes depending on your bracket. When evaluating whether your salary is competitive, the benefits package is part of the real compensation number.

Post-Tax Deductions

These come out after taxes are calculated. Common examples include Roth 401(k) contributions (taxed now, tax-free in retirement), life insurance premiums above certain thresholds, and wage garnishments. If you see an unfamiliar post-tax line item, ask HR what it is.

What to Check Every Pay Period

• Gross pay matches your expected hours (hourly) or prorated salary (salaried)
• 401(k) deduction reflects your current contribution election
• Health insurance deduction hasn't changed unexpectedly (common after open enrollment)
• Year-to-date (YTD) figures look correct — errors sometimes appear only in YTD
• Employer contributions (401k match, HSA contributions) appear if applicable

Payroll errors are more common than most people realize. A miscoded benefits election or incorrect hourly rate can go unnoticed for months if you never check. Review your pay stub at least once per quarter.

How Your Pay Stub Connects to Your Job Offer

When you received your offer letter, it showed a gross salary or hourly rate. Your pay stub is the reality check. If the take-home is lower than expected, work backwards: identify which deductions are discretionary (401k election, FSA) versus fixed (taxes, required benefits). That breakdown tells you exactly what you can and can't change.