How to Read Your Paycheck in 2026: A Line-by-Line Pay Stub Guide

Why Is My Paycheck Smaller Than My Salary?

You were hired at a certain salary. Then your first paycheck arrives, and it is noticeably smaller. Where did the rest go? This is the most common question new workers ask, and the answer is written right on your pay stub.

A pay stub is the summary that comes with each paycheck. It shows your gross pay (what you earned before anything is taken out), every tax and deduction, and your net pay (the amount that actually lands in your bank account). Net pay is often called your "take-home pay."

The gap exists because federal income tax is a "pay-as-you-go" system. You pay tax gradually every payday, not once a year. On top of that come Social Security, Medicare, possible state tax, and the benefits you signed up for. This guide walks through every line, in plain language, so you can check your own stub with confidence.[13]

Gross Pay: Where Your Paycheck Starts

Gross pay is the top number on your stub. If you are salaried, it is your annual salary divided by the number of pay periods. If you are paid hourly, it is your hourly rate times the hours you worked. Common pay schedules are weekly, every two weeks (biweekly), twice a month (semimonthly), and monthly.

If you work more than 40 hours in a single workweek and you are not "exempt," federal law says you must be paid overtime at 1.5 times your regular rate for the extra hours. The workweek is a fixed 7-day period. Hours cannot be averaged across two weeks to dodge overtime.[22, 21]

Gross pay also includes bonuses, commissions, and reported tips. Tips of $20 or more in a month are treated as taxable wages, so Social Security, Medicare, and income tax are withheld on them too. Two 2026 rules can lower the tax on some of this pay: the new deductions for qualified tips and qualified overtime.[6, 8]

Every stub also shows a "year-to-date" (YTD) column next to the current amount. YTD is the running total for the whole year so far. Watch both columns: the current period tells you about this paycheck, while YTD tells you where you stand for the year.

The Three Federal Taxes on Your Stub

Almost every U.S. pay stub has three federal deductions. The first is federal income tax. The second and third together are called FICA: Social Security and Medicare. FICA stands for the Federal Insurance Contributions Act, the law that created these payroll taxes.[4]

Pay stub labels vary by employer, which is why they confuse people. Federal income tax may appear as "Fed W/H," "Fed Tax," or "FIT." Social Security often shows up as "Fed OASDI/EE" or "SS Tax." Medicare appears as "Fed MED/EE" or "Medicare." The "EE" simply means "employee" (your share).

Here is the key difference. Income tax withholding is an estimate that gets settled when you file your tax return each spring. Social Security and Medicare are fixed percentages that are not settled later. Understanding this split is the foundation for reading everything else on the stub.[7]

Federal Income Tax Withholding

The federal income tax line is driven by the Form W-4 you filled out when you started. Your W-4 tells your employer your filing status, whether you have more than one job, dependents you claim, and any extra amount you want withheld. Your employer plugs those answers into the IRS tables in Publication 15-T.[11, 8]

Because it is only an estimate, the amount withheld may be too high or too low. If too much is withheld, you get a refund after filing. If too little is withheld, you owe a balance. Neither means an error on the stub. It means your W-4 settings and your real tax bill did not match perfectly.[10]

You can adjust this line at any time. The free IRS Tax Withholding Estimator lets you run a "paycheck checkup" and tells you exactly how to change your W-4 to hit the result you want. Doing this in the middle of the year is smart if you got married, had a child, or started a second job.[12]

A big refund is not free money. It means you lent your own cash to the government all year with no interest. A big balance due can bring penalties. The goal is to get your withholding close to your actual tax, so your paycheck is as accurate as possible.[13]

Social Security and Medicare (FICA)

Social Security tax is a flat 6.2% of your wages, and your employer pays another 6.2% for you. But it only applies up to a yearly wage ceiling. For 2026 that ceiling, called the Social Security wage base, is $184,500, up from $176,100 in 2025. Earn more than that, and no extra Social Security tax comes out for the rest of the year.[1, 2]

At the ceiling, the most you pay in Social Security tax for 2026 is $11,439, and your employer matches it. Medicare tax is different: it is 1.45% of every dollar you earn, with no wage ceiling at all. Your employer matches the 1.45% as well.[4]

High earners pay a little more for Medicare. An Additional Medicare Tax of 0.9% applies to wages above $200,000. Your employer must start withholding it once your pay passes $200,000 in a year, no matter your filing status, and there is no employer match on this extra 0.9%.[5]

FICA is not just a loss. It buys you future benefits. You earn Social Security "credits" as you work: in 2026 one credit costs $1,890 in wages, and you need 40 credits (about ten years of work) to qualify for retirement benefits. Medicare tax funds your hospital coverage at 65. Learn more in our Social Security claiming guide.[3]

State and Local Taxes

Below the federal taxes, many stubs show state income tax withholding. This depends entirely on where you live and work. Nine states have no broad income tax at all, so workers there see no state line. Everyone else has a state tax that works a lot like the federal one, with its own form similar to the W-4.

Some cities and counties add a local income tax on top. You might see a line for your city, a school district, or a transit district. These are usually small percentages, but they are real and they reduce your take-home pay.

A few states also withhold for state programs. You may see "SDI" (state disability insurance) or "PFL" (paid family leave) in states such as California, New Jersey, and New York. Because state and local rules vary so much, always check your own state tax agency for the exact rates that apply to you.

Pre-Tax Deductions: The Money That Shrinks Your Taxes

A pre-tax deduction comes out of your gross pay before taxes are calculated. That lowers your taxable wages, so you pay less tax. This is why the wage in Box 1 of your year-end W-2 is often smaller than your actual salary. The classic example is a traditional 401(k) contribution.[16]

For 2026, you can contribute up to $24,500 to a traditional 401(k). If you are age 50 or older you can add a $8,000 catch-up, and if you turn 60 to 63 during the year the catch-up rises to $11,250 instead. Every dollar you put in through your paycheck skips federal income tax this year.

Health accounts work the same way. In 2026 a Health Savings Account (HSA) allows up to $4,400 for self-only coverage or $8,750 for a family, and a health FSA allows $3,400. Your medical, dental, and vision premiums are usually pre-tax too, through what is called a Section 125 "cafeteria" plan. Even commuter benefits get a $340-a-month pre-tax break.[17, 18, 7]

One caution: many pre-tax items lower your income tax, but not your Social Security and Medicare tax. A 401(k) contribution still has FICA taken out. So on your stub you may see a wage used for income tax that is smaller than the wage used for FICA. That is normal, not a mistake.

Post-Tax Deductions

A post-tax deduction comes out after taxes are figured, so it does not lower your tax bill. The most common example is a Roth 401(k). You pay tax on that money now, and in exchange the withdrawals in retirement are tax-free. It sits on your stub right next to a traditional contribution but is treated the opposite way.

Other common post-tax items include union dues, charitable payroll gifts, and some insurance. Disability insurance is a smart one to pay with post-tax dollars: if you ever collect on it, the benefit comes to you tax-free, because you already paid tax on the premium.

Court-ordered items such as wage garnishments and child support also appear here as post-tax deductions. They can take a meaningful bite out of a check, and they follow their own legal limits, which is important enough to deserve its own section next.

Wage Garnishments: When the Law Takes Part of Your Check

A garnishment is a legal order that requires your employer to send part of your pay to someone you owe, such as a creditor after a court judgment. Federal law caps how much can be taken so that you keep enough to live on. The key term is "disposable earnings," which is your pay after legally required deductions like taxes.[20]

For an ordinary debt, the weekly garnishment cannot exceed the lesser of two limits: 25% of your disposable earnings, or the amount by which your disposable earnings top 30 times the federal minimum wage. At today’s $7.25 minimum wage, that protected floor is $217.50 a week. If your disposable pay is at or below that, nothing can be garnished.[23]

Some debts have higher limits. Child support and alimony can reach 50% to 65% of disposable earnings. Unpaid federal taxes and bankruptcy orders follow separate rules. If a garnishment appears and you did not expect it, you have rights. Our debt collection rights guide explains how to respond.

Imputed Income and Fringe Benefits

Sometimes your stub adds income you never received as cash. This is called "imputed income." It is the taxable value of a perk your employer gave you. Because the government taxes the perk, its value is added to your wages so the right tax can be withheld, even though your cash pay did not go up.

The classic case is employer-paid group-term life insurance. The first $50,000 of coverage is tax-free, but the value of coverage above $50,000 is imputed income. It gets added to your taxable wages and reported on your W-2 in Box 12 with code C. Personal use of a company car works the same way.[9]

Imputed income can raise the tax withheld from a paycheck even though your cash pay stayed the same, which surprises people. It is not an error. If you see a benefit added to your wages that you do not recognize, ask your payroll or HR team to explain which perk it represents.

Net Pay and How You Actually Get Paid

Net pay is the simple result at the bottom: gross pay, minus all taxes, minus all deductions. That is the number that reaches you. If you ever want to double-check the math, add up every tax and deduction on the stub and subtract the total from gross pay. It should match your net pay to the penny.

How you receive that money is partly your choice. Common options are direct deposit into your own bank account, a paper check, or a prepaid payroll card. Direct deposit is usually the fastest and cheapest. If a payroll card is offered, read its fee schedule closely, because some cards charge for things like ATM use or balance checks.

You have a federal protection here. Under Regulation E, your employer cannot force you to receive your wages on one specific payroll card. They must offer at least one alternative, such as direct deposit to a bank of your choosing, and let you pick. Know this right so no one pressures you into a fee-heavy card.[24]

Is Your Employer Even Required to Give You a Pay Stub?

Here is a surprise: no federal law requires your employer to hand you a pay stub. The Fair Labor Standards Act (FLSA) requires employers to keep accurate payroll records, including hours worked, pay rate, additions and deductions, and the pay period. But keeping records is not the same as giving them to you.[19]

Pay stub rules come from the states instead, and they vary a lot. Most states require employers to give some kind of pay statement, but about ten states have no such law. States are often grouped as "access" states, "access/print" states, and "opt-out" or "opt-in" states for electronic stubs. Your state labor department has the exact rule.

Whatever your state requires, always save your stubs. You will need them to prove income when you rent an apartment, apply for a loan, or claim benefits. They are also your best evidence if a paycheck is ever wrong. Employers must keep payroll records for at least three years, but your own copies protect you first.

Year-to-Date Totals and Your W-2

Your final pay stub of the year and your W-2 form should tell the same story. The W-2 is the official summary your employer sends every January so you can file taxes. The YTD numbers on your last stub are essentially a preview of the boxes on that W-2.[14]

Do not be alarmed if the boxes do not match each other. Box 1 (federal taxable wages) is often lower than Box 3 and Box 5 (Social Security and Medicare wages), because pre-tax 401(k) money lowers Box 1 but not FICA wages. Box 12 uses letter codes, such as C for group-term life, D for 401(k), W for HSA, and DD for the cost of your health coverage.[15]

Checking your stub against your W-2 protects you. If your last YTD federal tax does not roughly match Box 2, or your YTD wages look off, flag it before you file. New for the 2026 tax year, the W-2 adds codes TA, TP, and TT to report items like qualified tips and overtime, so expect a few unfamiliar entries.

Common Pay Stub Errors and What to Do

Payroll systems make mistakes. The most common ones are missing overtime, the wrong number of hours, an old address that routes the wrong state tax, the wrong filing status from a stale W-4, and benefit deductions that do not match what you signed up for. A quick review each payday catches most of them early.

If something looks wrong, start with your payroll or HR department, and put your question in writing. Bring your own copy of the stub and point to the exact line. Many issues, like a wrong address or an outdated W-4, are fixed in minutes once you flag them.

If your employer will not fix a real wage problem, you can file a complaint with the U.S. Department of Labor’s Wage and Hour Division, and state agencies help too. Keep every stub as evidence. And if the issue is that your withholding is off, remember you can adjust it yourself with a new W-4 at any time.[19, 12]

Frequently Asked Questions