Paycheck deductions explained in one line: your gross pay is reduced by mandatory taxes and by any benefits, retirement contributions, or court-ordered withholdings that apply to you, and what’s left is your net pay. For most workers, federal income tax, Social Security, and Medicare alone consume roughly 20% to 35% of gross pay before voluntary deductions even enter the picture. The rest depends on the choices you made when you were hired and the coverage you signed up for during open enrollment.
Federal Income Tax
Your employer calculates federal income tax withholding from the Form W-4 you filled out when you started. That form captures your filing status, dependent credits, any extra withholding you asked for, and adjustments for other income.1Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate Federal law requires every employer paying wages to withhold according to IRS tables and formulas.2Office of the Law Revision Counsel. 26 U.S.C. 3402 – Income Tax Collected at Source The amount rises with your income because the federal system is progressive: higher portions of income are taxed at higher rates as they move through brackets.
If your W-4 doesn’t reflect your current situation, submit a new one. Getting married, having a child, or picking up a second job can throw withholding off. Too little withheld means a tax bill and possibly penalties in April. Too much means you gave the government an interest-free loan all year. Either way, the fix is a revised W-4 to payroll.
State and Local Income Tax
Most states also withhold income tax from each paycheck. Nine states don’t tax wages at all, so if you work in one of them, this line simply won’t appear on your stub. Some cities and counties add their own local income tax on top, with rates ranging from fractions of a percent to nearly 4% in the most expensive jurisdictions.
State withholding works much like the federal version: your employer calculates it and sends it to the state tax agency on your behalf. Some states use a flat rate; others use progressive brackets. The point is the same either way, which is to collect the tax gradually instead of leaving you with a large bill at filing time.
Social Security and Medicare
Two federal programs are funded through a flat-rate payroll tax that splits between you and your employer. You pay 6.2% of your wages toward Social Security and 1.45% toward Medicare, for a combined 7.65%.3Office of the Law Revision Counsel. 26 U.S.C. 3101 – Rate of Tax These two together are usually labeled FICA on your pay stub.
The Social Security portion only applies to earnings up to $184,500 in 2026. Once your year-to-date wages cross that threshold, the 6.2% deduction disappears from the remaining paychecks for the year. An employee at or above the cap will have contributed a maximum of $11,439 in Social Security tax for 2026.4Social Security Administration. Contribution and Benefit Base
Medicare has no earnings cap. Every dollar you earn is subject to the 1.45% tax. If your wages exceed $200,000 in a calendar year, your employer must begin withholding an additional 0.9% Medicare tax on everything above that amount.5Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Employers apply the $200,000 trigger for everyone regardless of filing status, but the actual liability thresholds are $250,000 for married filing jointly and $125,000 for married filing separately. Any mismatch is reconciled on your tax return.
Health Coverage and Other Pre-Tax Benefits
Many workplace benefits come out of your paycheck before income taxes are calculated. That lowers your taxable income, so you pay less federal and state tax. The tax code allows employers to run these arrangements, letting employees choose among qualified benefits without the selected benefits counting as taxable income.6Office of the Law Revision Counsel. 26 U.S. Code 125 – Cafeteria Plans
Health insurance premiums are the most common pre-tax deduction. Your employer typically covers a portion of the cost, and your share comes out of each paycheck before taxes. How much depends on the plan you chose and whether you’re covering just yourself or your family.
Health Savings Accounts
If you’re enrolled in a high-deductible health plan, you may be able to contribute to a Health Savings Account. Money goes in pre-tax, grows tax-free, and comes out tax-free when spent on qualified medical expenses. For 2026, you can contribute up to $4,400 with individual coverage or $8,750 with family coverage, plus an extra $1,000 if you’re 55 or older.7Internal Revenue Service. Revenue Procedure 2025-19 HSA funds roll over indefinitely and stay with you if you change jobs.
Flexible Spending Accounts
A Flexible Spending Account also lets you pay for eligible medical expenses with pre-tax dollars, but unused funds are generally forfeited at the end of the plan year. Your employer may soften this with either a carryover of up to $680 into the next year or a grace period of up to two and a half months to spend remaining funds, but not both. The maximum you can contribute to a health care FSA in 2026 is $3,400.7Internal Revenue Service. Revenue Procedure 2025-19 If you routinely forfeit FSA money, lower your election or switch to an HSA if your plan qualifies.
Retirement Plan Contributions
If your employer offers a 401(k) or 403(b), the contributions you elect come straight out of your paycheck each pay period. For 2026, the maximum you can defer is $24,500. Workers aged 50 and older can add $8,000 in catch-up contributions, bringing the total to $32,500. Workers specifically aged 60 through 63 use a higher catch-up limit of $11,250 instead of $8,000.8Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
Traditional 401(k) contributions are pre-tax. They reduce your taxable income now, and you pay income tax when you withdraw the money in retirement. Roth 401(k) contributions work the opposite way: you pay tax now, and qualified withdrawals in retirement come out tax-free.9Internal Revenue Service. 401(k) Plans The choice comes down to whether you think your tax rate will be higher now or later.
One change worth noting for 2026: if you earned more than $150,000 in the prior year, any catch-up contributions to your employer plan must be made as Roth (after-tax) contributions. Higher earners making catch-up deferrals don’t get to choose traditional.
Wage Garnishments
Some deductions aren’t voluntary and aren’t taxes. They’re ordered by a court or a government agency. If you owe unpaid child support, defaulted student loans, or back taxes, your employer can be legally required to withhold a portion of your pay and send it directly to the creditor. The IRS can also issue a levy for unpaid federal taxes without going through a court first.
Federal law caps garnishment for ordinary consumer debts at whichever is smaller: 25% of your disposable earnings, or the amount by which your weekly pay exceeds 30 times the federal minimum wage.10Office of the Law Revision Counsel. 15 U.S. Code 1673 – Restriction on Garnishment The “whichever is smaller” rule protects lower-wage workers from having their entire paycheck gutted.
Child support and alimony orders allow larger deductions:
- Up to 50% of disposable earnings if you’re supporting another spouse or child beyond the one the order covers
- Up to 60% if you’re not supporting anyone else
- An additional 5% on top of either figure if payments are more than 12 weeks overdue
A support order can therefore reach as high as 65% of disposable earnings in the worst case.10Office of the Law Revision Counsel. 15 U.S. Code 1673 – Restriction on Garnishment When multiple garnishment orders arrive at the same time, federal law doesn’t dictate which one gets paid first. State law or the specific court or agency that issued the order sets the priority.11U.S. Department of Labor. Fact Sheet #30: Wage Garnishment Protections of the Consumer Credit Protection Act
Reading Your Pay Stub
Your pay stub is the receipt for everything above. Most stubs have two columns: the current pay period and year-to-date totals. The current column shows what you earned and what was deducted for this paycheck. The year-to-date column tracks cumulative totals since January 1, which is where you can spot problems building up over time.
Start at the top with gross pay and work your way down. Each deduction should have a label: federal tax, state tax, Social Security, Medicare, health insurance, 401(k), and so on. Subtract every listed deduction from gross pay, and you should land on the net pay figure at the bottom. If those numbers don’t reconcile, something needs a closer look.
One specific thing to watch: the Social Security line on your year-to-date column should stop increasing once your cumulative earnings hit $184,500.4Social Security Administration. Contribution and Benefit Base If it keeps appearing after that, your employer is over-withholding and you need to flag it. Same for benefits elections. If you dropped dental coverage during open enrollment but the premium is still coming out, that’s a payroll error, not something that will fix itself.
What to Do When a Deduction Looks Wrong
Payroll mistakes happen more often than people realize, and the fix is usually straightforward if you catch it early. Start with your HR or payroll department. Most errors come down to a data-entry issue or a benefits change that hasn’t been processed yet, and a quick conversation resolves it.
For more serious problems, like an employer that repeatedly underpays wages or refuses to correct withholding errors, contact your state labor department or an employment attorney. Federal law gives you two years to file a claim for back pay, or three years if the violation was intentional.12Office of the Law Revision Counsel. 29 U.S.C. 255 – Statute of Limitations Your state may offer additional protections with longer deadlines. Don’t let those deadlines slip past you while payroll keeps promising a fix.