The employee taxes on a pay stub fall into four buckets: federal income tax, Social Security tax (6.2% of wages up to $184,500 in 2026), Medicare tax (1.45% of all wages), and, in most places, state or local income tax. Together with any pre-tax benefit contributions and other withholdings, these deductions turn your gross pay into the net amount that lands in your account.
Federal Income Tax Withholding
Federal law requires your employer to withhold part of each paycheck toward your annual income tax bill.1Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source The system is pay-as-you-go: instead of one big bill in April, you pay in installments across the year.
How much comes out depends mostly on the Form W-4 you filed. Your filing status (single, married filing jointly, or head of household) sets the rate schedule your employer uses.2Internal Revenue Service. Form W-4 (2026) Step 3 lets you claim credits like the child tax credit (worth up to $2,200 per qualifying child in 2026), which shrinks the tax pulled from each check.3Internal Revenue Service. Child Tax Credit Step 4 lets you request extra withholding per period or account for non-wage income like interest, dividends, or retirement distributions.
Employers apply your W-4 answers to the IRS withholding tables in Publication 15-T to figure each paycheck’s federal deduction.4Internal Revenue Service. Publication 15-T (2026) – Federal Income Tax Withholding Methods For 2026, federal rates start at 10% on the first $12,400 of taxable income for a single filer and climb through several brackets up to 37% on income above $640,600.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Never turned in a W-4? Your employer must withhold as if you were single or married filing separately with no adjustments, which usually means more comes out than you actually owe.
Avoiding an Underpayment Penalty
Too little withheld over the year can trigger an underpayment penalty at tax time. You generally avoid it if your withholding and estimated payments cover at least 90% of the current year’s tax or 100% of the prior year’s tax, whichever is smaller. If your adjusted gross income topped $150,000 in the prior year ($75,000 if married filing separately), the prior-year safe harbor climbs to 110%.6Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty There’s also no penalty if you owe less than $1,000 when you file.
Social Security and Medicare (FICA)
The Federal Insurance Contributions Act creates two payroll taxes that show up as separate line items on every stub.7Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax Unlike federal income tax, the rates are fixed and don’t move with your filing status or number of dependents.
- Social Security tax is 6.2% of your gross wages, but only up to an annual wage base. For 2026, that cap is $184,500. Once your year-to-date wages pass it, Social Security tax stops for the rest of the year. The most an employee can pay in Social Security tax for 2026 is $11,439.8Social Security Administration. Contribution and Benefit Base
- Medicare tax is 1.45% of all wages, with no cap. Every dollar you earn is subject to it.9Internal Revenue Service. Topic No. 751 – Social Security and Medicare Withholding Rates
- An Additional Medicare Tax of 0.9% kicks in once your wages pass $200,000 in a calendar year ($250,000 for married filing jointly, $125,000 for married filing separately). Your employer starts withholding it automatically when your pay crosses $200,000 regardless of your actual filing status; you reconcile any difference on your return.10Internal Revenue Service. Topic No. 560 – Additional Medicare Tax
A few workers are exempt from FICA. Students employed by the school, college, or university where they are enrolled and regularly attending classes generally don’t owe FICA on those wages, as long as they aren’t classified as professional employees of the institution.11Internal Revenue Service. Student FICA Exception Certain nonresident aliens and members of religious orders may qualify for exemptions as well.
State and Local Income Taxes
Depending on where you live and where you work, your stub may show state and local withholding. Most states tax wages, though roughly eight have no state income tax at all. Among the states that do, some use a flat rate and others use progressive brackets similar to the federal structure.
Local income taxes are less common but real. Some cities, counties, and school districts levy their own taxes on wages. Your employer figures the correct withholding based on both where you perform the work and where you live, which can be different jurisdictions with different rates. Moved recently, or started a new work location? Tell payroll so the right state and local taxes come out.
Some states also require employees to chip in for state disability insurance or paid family leave. These deductions typically run from a fraction of a percent up to just over one percent of wages, and where they apply, they appear on the stub as their own line.
Pre-Tax Deductions and Why They Shrink Your Tax
Many stubs list deductions that come out of gross pay before taxes are calculated. These pre-tax deductions lower your taxable wages, so both federal income tax and FICA are computed on a smaller number. Most run through a Section 125 cafeteria plan, which lets employees pay for qualified benefits with pre-tax dollars.12Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans
- Your share of employer-sponsored medical, dental, or vision premiums is usually pre-tax.
- Traditional 401(k), 403(b), and 457 contributions up to $24,500 in 2026, with additional catch-up amounts allowed for older workers.13Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026
- Health Savings Account contributions up to $4,400 for self-only coverage or $8,750 for family coverage in 2026, if you’re on a qualifying high-deductible health plan.14Internal Revenue Service. Expanded Availability of Health Savings Accounts Under the One Big Beautiful Bill Act
- Health care Flexible Spending Account contributions up to $3,400 in 2026 for eligible medical expenses not covered by insurance.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
A bigger pre-tax contribution means a smaller income tax and FICA hit on each check. It also means less cash in hand today, so the trade-off is real.
Imputed Income
Sometimes a stub adds an amount to your taxable wages that you never actually receive in cash. That’s imputed income. The most common trigger is employer-provided group-term life insurance above $50,000 of coverage: the cost of the excess coverage, valued using an IRS premium table, is added to your taxable wages and taxed for Social Security and Medicare.15Internal Revenue Service. Group-Term Life Insurance You won’t see more money deposited, but you’ll see slightly higher taxes withheld. Other fringe benefits, like personal use of a company car, can also create imputed income.
Wage Garnishments
If a court or government agency orders your employer to withhold pay for a debt, the garnishment appears as its own line. Federal law caps how much can be taken from your disposable earnings, meaning gross pay minus legally required deductions like taxes.
- For consumer debts such as credit cards, medical bills, and personal loans: no more than 25% of weekly disposable earnings, or the amount by which weekly disposable pay exceeds 30 times the federal minimum wage, whichever produces the smaller garnishment.16Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment
- For child or spousal support: up to 50% of disposable earnings if you are supporting another spouse or dependent child, or up to 60% if you aren’t. Those limits go up by 5 points, to 55% and 65%, if the support is more than 12 weeks overdue.16Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment
Federal student loan garnishments and IRS tax levies follow their own rules and limits. If a garnishment on your stub looks wrong, contact both your employer’s payroll department and the agency or court that issued the order.
Reading Your Net Pay Off the Stub
Net pay is what’s left after every deduction is subtracted from gross pay. The order matters:
Net Pay = Gross Pay − Pre-Tax Deductions − Federal Income Tax − Social Security Tax − Medicare Tax − State/Local Taxes − Garnishments and Post-Tax Deductions
Gross pay is your total compensation for the period before anything comes out. For hourly workers, that’s hours times rate, plus any overtime. For salaried workers, it’s annual salary divided by the number of pay periods. Bonuses, commissions, and tips also count.
Pre-tax deductions come out first, which lowers the wages that federal income tax and FICA are calculated on. The tax withholdings run next on that reduced number. Post-tax items come last: Roth 401(k) contributions, union dues, garnishments, and any after-tax insurance premiums.
Your stub is the record for every step. At year’s end, your employer issues a W-2 summarizing wages, withholdings, and pre-tax deductions for the calendar year, and comparing your final stub of the year to the W-2 is a quick way to catch errors before filing. If withholding looks off during the year, the IRS Tax Withholding Estimator at irs.gov can tell you whether to submit a fresh W-4.