A paycheck works by starting with your gross earnings and then subtracting, in order, federal income tax withholding, Social Security and Medicare (FICA), any state or local taxes, and your benefit and retirement deductions. What’s left is your net pay. Understanding how paychecks work matters because the gap between your salary and your deposit is rarely small, and most of the line items on your pay stub are ones you can influence.
How Gross Pay Is Calculated
Gross pay is your total compensation before anything is taken out. If you’re hourly, it’s your hours times your rate. Hours over 40 in a workweek must be paid at one and a half times your regular rate under the Fair Labor Standards Act, unless you qualify as exempt.1U.S. Department of Labor. Wages and the Fair Labor Standards Act Federal minimum wage is still $7.25 per hour, though most states set a higher floor.
Salaried employees get a fixed slice of their annual pay each period. Whether you’re eligible for overtime depends on your duties and your salary. After a federal court struck down the Department of Labor’s 2024 overtime rule, the salary threshold reverted to $684 per week, or $35,568 a year. Above that, if your duties fit the executive, administrative, or professional criteria, your employer can classify you as exempt.2U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption
Bonuses, commissions, and shift differentials also count as gross earnings, but they’re withheld differently. The IRS lets employers apply a flat 22% to supplemental wages, or 37% on supplemental wages above $1 million in a year.3Internal Revenue Service. Publication 15 (2026), Circular E, Employer’s Tax Guide That flat rate is why a bonus check often looks smaller than expected, and why some of it may come back to you at filing time.
Tipped workers are a special case. Employers can pay a cash wage as low as $2.13 an hour and count tips toward the rest of the federal minimum. If your tips don’t get you to $7.25, the employer has to make up the difference.4eCFR. 29 CFR Part 531 Subpart D – Tipped Employees Your stub should show both the cash wage and the reported tips.
Federal Income Tax Withholding
Federal income tax is usually the biggest single deduction. The amount withheld each period comes from what you put on Form W-4: filing status, other income, deductions, and any extra withholding you requested.5Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate Your employer runs those inputs through IRS withholding tables to estimate what each check should send toward your annual tax bill.
The federal system is progressive, so different slices of your income are taxed at different rates. For 2026, a single filer pays:
- 10% on income up to $12,400
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% above $640,600
Married joint filers get wider brackets at each tier.6Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026a> Moving into a higher bracket doesn’t push all your income to the higher rate. Only the dollars sitting inside that bracket are taxed at it.
The 2026 standard deduction is $16,100 for single filers, $32,200 for joint filers, and $24,150 for head of household. Your employer builds these amounts into your withholding, which is why two people earning the same salary with different filing statuses see different federal tax on their stubs.
If you consistently owe a lot at tax time or get an oversized refund, your W-4 needs an update. You can submit a new one whenever you want. Marriage, a new child, or a second job are the usual triggers.
FICA: Social Security and Medicare
FICA funds Social Security and Medicare. It isn’t optional. Your employer withholds 6.2% for Social Security and 1.45% for Medicare from every check, and matches both out of its own pocket.7Social Security Administration. What Is FICA
The Social Security tax stops at $184,500 in earnings for 2026.8Social Security Administration. Contribution and Benefit Base Once your year-to-date wages pass that wage base, the Social Security line on your stub goes to zero and your take-home rises for the rest of the year.
Medicare has no cap, so 1.45% applies to every dollar. If you earn more than $200,000 in a year as a single filer, your employer withholds an extra 0.9% on the excess. The threshold is $250,000 for married joint filers.9Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Your employer doesn’t match the extra 0.9%; it comes entirely from you.
State and Local Taxes
Nine states have no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In every other state, rates run from around 1% to over 13% at the top marginal rate, depending on where you live and how much you earn.
Some cities and counties layer on their own income or payroll taxes, most commonly in parts of the Midwest and Mid-Atlantic and in large cities. The amounts are usually modest next to federal withholding but they still show up as separate lines. If you live in one state and work in another, expect withholding for the work state, and check your stub to make sure the right jurisdiction is being tapped. Most states offer credits so you aren’t taxed twice on the same income.
Pre-Tax Deductions
Pre-tax deductions come out of gross pay before income tax is calculated, which lowers the income you’re actually taxed on. Retirement contributions and health benefits are the big ones.
For 2026, the traditional 401(k) contribution limit is $24,500. If you’re 50 or older, you can add an $8,000 catch-up; workers aged 60 through 63 get a larger catch-up of $11,250.10Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026; IRA Limit Increases to $7,500 Every dollar into a traditional 401(k) reduces your taxable income dollar for dollar, and you feel it on each paycheck. A Roth 401(k) uses after-tax dollars and doesn’t cut your current withholding.
Health insurance premiums through your employer are almost always deducted pre-tax through a Section 125 cafeteria plan. If your plan includes a health savings account, the 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage.11Internal Revenue Service. IRS Notice 2026-05 – HSA Inflation Adjustments HSA money goes in pre-tax and comes out tax-free for qualified medical costs.
Flexible spending accounts for healthcare or dependent care also reduce taxable income. Unlike an HSA, most FSA balances follow a use-it-or-lose-it rule, so overshooting your election costs you. Review the number at open enrollment instead of copying last year’s choice.
Post-Tax Deductions
Some deductions come out after tax is calculated and don’t lower your taxable income. Roth 401(k) contributions belong here, along with some supplemental life and disability coverage and union dues. They shrink your take-home without giving you a tax break now.
Employer-provided life insurance above $50,000 in coverage catches people off guard. The IRS treats the premium cost of coverage over that amount as taxable income, so you may see a small “imputed income” line that nudges your taxes up even though no cash changed hands.
Wage Garnishments
If a court orders a garnishment or the IRS issues a levy, your employer has to withhold the amount before paying you. These are involuntary.
For ordinary consumer debts like credit card judgments, federal law caps garnishment at the lesser of 25% of your disposable earnings or the amount by which your weekly pay exceeds 30 times the federal minimum wage ($217.50 at $7.25 an hour). Child support garnishments can reach 50% of disposable earnings if you’re supporting another family, or 60% if you aren’t, with another 5% possible if payments are more than 12 weeks overdue.12U.S. Department of Labor. Fact Sheet #30 – Wage Garnishment Protections of the Consumer Credit Protection Act
Federal tax levies use their own formula based on your standard deduction and dependents. The IRS sends your employer Publication 1494 showing the exempt amount per pay period; everything above that goes to the IRS until the debt is paid or you set up an arrangement.13Internal Revenue Service. Information About Wage Levies
Net Pay and What to Check on Your Stub
Net pay is the number at the bottom, the amount that lands in your account. The distance from gross to net surprises most people early in their careers. A $60,000 salary doesn’t translate into $60,000 of spendable income; federal and FICA taxes alone usually take 20% to 30% of gross, before any state tax or benefits.
Your stub also shows year-to-date totals for every line. These are worth a look, especially Social Security. Once your YTD earnings pass $184,500, the Social Security deduction should stop. If it doesn’t, your employer made a mistake and you’ll need to flag it. YTD figures also help you confirm your 401(k) is on pace without blowing past the annual limit.
Pay Periods and How Often You’re Paid
Your pay period is the block of time a check covers; the pay date is when the money actually arrives, usually a few days later so payroll can process it. Biweekly is the most common private-sector schedule, followed by weekly, semimonthly, and monthly.14U.S. Bureau of Labor Statistics. Current Employment Statistics Publications Pay Period Frequency
The schedule matters for budgeting. Biweekly means 26 checks a year, with two months that hold a third pay date. Semimonthly is 24 checks, always on the same two dates. Weekly is 52. Monthly is 12, and the deposits are larger but further apart.
Most states regulate how quickly you have to be paid after a period ends, and they set separate deadlines for final paychecks after termination. Those deadlines run from your last day of work to the next regular payday, depending on the state and whether you quit or were fired.
How You Actually Get the Money
Direct deposit through the ACH network is the most common method. Funds move electronically from your employer’s bank to yours and usually clear on the morning of payday.15Nacha. The ABCs of ACH
If you don’t have a bank account, your employer may offer a payroll card that works like a prepaid debit card loaded each pay period. Federal rules under Regulation E require the issuer to disclose fees upfront, including ATM, balance inquiry, and inactivity charges. Your employer can’t force you to take a payroll card. The issuer has to tell you that you don’t have to accept it and that you can ask about other ways to be paid.16eCFR. 12 CFR Part 1005 – Electronic Fund Transfers (Regulation E) Watch out for out-of-network ATM fees and inactivity charges if you don’t use the card often.
Paper checks still exist but are rarer. One thing worth knowing: the FLSA doesn’t actually require your employer to give you a pay stub.17U.S. Department of Labor. Are Pay Stubs Required – FLSA Advisor Most states do require some form of earnings statement, and most employers issue one either way. If yours doesn’t, ask in writing.
What to Do If Your Paycheck Is Wrong
Payroll mistakes are common. The frequent ones are wrong hours, missing overtime, incorrect tax withholding, and benefit deductions that don’t match what you elected. Start by comparing your stub against your own record of hours and your most recent benefit enrollment confirmation.
Raise anything odd with payroll first. Most errors are clerical and get fixed on the next cycle. If your employer won’t correct it, or if wages are being deliberately withheld, you can file a complaint with the Department of Labor’s Wage and Hour Division at 1-866-487-9243. Complaints are confidential, and retaliation for filing one is prohibited.18U.S. Department of Labor. How to File a Complaint
Retirement plan money that was deducted from your check but never deposited into your account is a bigger problem. The Department of Labor’s Employee Benefits Security Administration investigates those cases.19U.S. Department of Labor. Enforcement Employers must keep payroll records for at least three years, so older discrepancies can still be looked into. Keep your own stubs too. They’re the best evidence you have if a dispute goes past a simple correction.