Payroll deductions are the amounts your employer subtracts from your gross pay before handing you what is left. They fall into two buckets: mandatory deductions required by federal, state, or local law, and voluntary deductions you authorize in writing for things like retirement savings or health coverage. The combined total is the gap between what you earn on paper and what actually lands in your bank account.
Mandatory Federal Tax Withholdings
Every employer is legally required to collect Federal Insurance Contributions Act taxes from your wages to fund Social Security and Medicare.1Office of the Law Revision Counsel. 26 U.S. Code 3102 – Deduction of Tax From Wages The Social Security portion is 6.2% of your wages up to $184,500 in 2026, and the Medicare portion is 1.45% on all wages with no cap.2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Your employer pays a matching amount on top of what comes out of your check, so the employer half never appears on your pay stub.
If a single employer pays you more than $200,000 in a calendar year, that employer must also withhold an Additional Medicare Tax of 0.9% on every dollar above the threshold. There is no employer match for this surcharge. The $200,000 trigger is per employer, not household. If you file jointly and your combined earnings pass the actual filing-status threshold of $250,000 for married couples, you may owe more or receive a credit when you file your return.3Internal Revenue Service. Topic No. 560, Additional Medicare Tax
Federal income tax withholding is the other mandatory piece, and the amount depends on the information you provide on Form W-4. That form captures your filing status, whether you have income from other jobs, and any adjustments for deductions or credits you expect to claim.4Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate Skip the form and your employer must treat you as a single filer with no adjustments, which usually means more tax withheld than necessary.5Internal Revenue Service. Form W-4 (2026) Employee’s Withholding Certificate Updating your W-4 after a marriage, a new child, or a change in side income is the single easiest way to keep withholding accurate and avoid a surprise bill in April.
State and Local Withholdings
Most states impose their own income tax, and your employer withholds it from each paycheck the same way it handles federal income tax. A handful of states have no income tax at all, and others add city or county-level taxes on top. Rates and rules vary widely, so the same salary produces a very different pay stub across state lines.
Six jurisdictions run temporary disability insurance systems where employees contribute a percentage of wages through payroll, with the cost at least partly funded by employee deductions.6U.S. Department of Labor. Temporary Disability Insurance A growing number of states also mandate deductions for paid family and medical leave programs. Each line is small on its own, but if you recently moved to a new state, expect unfamiliar entries on your stub.
Voluntary Deductions You Authorize
Anything beyond legally required withholdings needs your written or electronic consent before your employer can touch your paycheck. The common categories are retirement contributions, health-related accounts, and insurance premiums.
Retirement Plans
If your employer offers a 401(k) or 403(b) plan, you can direct a portion of each paycheck into the account. For 2026, you can contribute up to $24,500. Workers age 50 and older can add a catch-up contribution of up to $8,000, bringing the total to $32,500. If you are 60 through 63, a higher catch-up of $11,250 applies instead of the standard $8,000 under the SECURE 2.0 Act.7Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
Health Premiums, HSAs, and FSAs
Health insurance premiums are one of the most common voluntary deductions. Most employer-sponsored plans let you pay your share of medical, dental, and vision premiums directly from your paycheck before taxes are calculated, which lowers both your income tax and your Social Security and Medicare taxes when the plan qualifies under Section 125 of the tax code.8Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
Health Savings Accounts let you set aside pre-tax money for medical expenses if you have a high-deductible health plan. For 2026, the contribution limit is $4,400 for individual coverage and $8,750 for family coverage.9Internal Revenue Service. Expanded Availability of Health Savings Accounts Under the One, Big, Beautiful Bill Act Flexible Spending Accounts work similarly but with lower limits and a use-it-or-lose-it structure. For 2026, the health care FSA maximum is $3,400, and the dependent care FSA limit is $7,500 per household.10FSAFEDS. New 2026 Maximum Limit Updates
Insurance and Other Benefits
Employer-sponsored life insurance, disability coverage, and supplemental policies like accident or critical illness plans are also commonly deducted from your paycheck. The advantage is convenience and uninterrupted coverage, since premiums are pulled automatically each pay period. You can usually change or cancel these elections during your employer’s annual open enrollment window or after a qualifying life event such as marriage, divorce, or the birth of a child.
Pre-Tax vs. Post-Tax
Whether a deduction comes out before or after taxes are calculated changes both your current paycheck and your long-term tax picture. Pre-tax deductions reduce the wages that income taxes are calculated on, so you pay less federal and state income tax now. The common examples are traditional 401(k) contributions, health premiums under a Section 125 cafeteria plan, HSA deposits, and FSA elections.
Not all pre-tax deductions save the same amount. Health premiums funneled through a Section 125 cafeteria plan avoid both income tax and FICA taxes.8Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans Traditional 401(k) contributions reduce income tax but are still subject to Social Security and Medicare tax.2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Both save you money, but a dollar going to health premiums through a cafeteria plan saves slightly more in current taxes than a dollar going to a traditional 401(k).
Post-tax deductions come out after all taxes have been assessed. These include Roth 401(k) contributions, certain life insurance premiums, and union dues. You get no immediate tax break, but Roth contributions grow tax-free and qualified withdrawals in retirement are not taxed at all. Review your Form W-2 at year-end to confirm that pre-tax and post-tax amounts are recorded in the correct boxes, because a misclassification can trigger an underpayment notice from the IRS.
Court-Ordered Wage Garnishments
Wage garnishments sit in their own category. They are involuntary, but they do not originate with your employer. A court or government agency orders your employer to withhold part of your pay to satisfy a debt, and your employer has no choice but to comply.
Federal law caps how much can be garnished for ordinary consumer debts. The maximum is the lesser of 25% of your disposable earnings or the amount by which your weekly pay exceeds 30 times the federal minimum wage, which remains $7.25 per hour in 2026.11U.S. Department of Labor. Fact Sheet 30 – Wage Garnishment Protections of the Consumer Credit Protection Act Disposable earnings means what remains after legally required deductions like taxes. Voluntary items such as 401(k) contributions are generally not subtracted first, so the garnishment is calculated on a larger number than your take-home pay.
Child support and alimony garnishments can take significantly more:
- Up to 50% of disposable earnings if you are supporting another spouse or child beyond the one covered by the order.
- Up to 60% if you are not supporting anyone else.
- An additional 5% on top of either limit if the support payments are more than 12 weeks overdue, pushing the cap to 55% or 65%.
Federal law protects you from being fired solely because your wages are garnished for a single debt. That protection disappears once a second separate garnishment is added, so it is narrower than most people assume.11U.S. Department of Labor. Fact Sheet 30 – Wage Garnishment Protections of the Consumer Credit Protection Act
What Employers Cannot Deduct
Federal law restricts employers from pulling money out of your paycheck for business expenses when doing so would push your effective pay below the minimum wage. The cost of required uniforms, tools, or equipment cannot be deducted if it drops your hourly rate below $7.25. Many states set a higher floor, which tightens the practical restriction. If your employer requires you to buy or maintain a uniform, that cost is treated as a business expense of the employer under federal regulations.12eCFR. 29 CFR 4.168 – Wage Payments – Deductions From Wages Paid
Rules on cash register shortages, damaged equipment, and unreturned company property vary significantly by state. Some states prohibit these deductions entirely without a signed written agreement. Others allow them only when the employee was clearly at fault and the deduction does not reduce pay below minimum wage. Before agreeing to any deduction for losses or damages, check your state labor agency’s rules, because your employer’s policy may be more aggressive than the law allows.
If your employer accidentally overpays you, federal law does allow recovery of the overpaid amount from future paychecks, even if the deduction temporarily brings your pay below minimum wage.13U.S. Department of Labor. FLSA2004-19NA – Opinion Letter on Wage Overpayment Recoupment The employer cannot add administrative fees or interest that would further reduce your pay below minimum wage. Timing of the recoupment is at the employer’s discretion, and many states layer additional protections on top of the federal baseline, including written-notice requirements before any recovery begins.
Fixing Errors and Keeping Records
Mistakes happen: your employer withholds too much, too little, or categorizes a deduction in the wrong tax bucket. How the correction works depends on when the error is caught.
For federal income tax withholding errors, corrections are straightforward if discovered in the same calendar year the wages were paid. The employer adjusts future paychecks and, if you were overcharged, reimburses you in that same year. Once the calendar year closes, the options narrow. The employer can only correct certain administrative errors on a prior-year return and must file Form 941-X to make adjustments.14Internal Revenue Service. Correcting Employment Taxes Flag any paycheck error immediately. The window for easy fixes closes faster than most people expect.
If your employer does not correct the problem after you report it, you can file a complaint with the federal Wage and Hour Division within two years of the erroneous paycheck. If you believe the error was intentional, that deadline extends to three years.
Your employer must keep payroll records for at least three years and basic time records for at least two years under federal law.15eCFR. 29 CFR Part 516 – Records to Be Kept by Employers Keep your own copies too. Save every pay stub, and compare the deductions listed on your year-end W-2 against your final pay stub. A discrepancy between the two is a signal that something was recorded incorrectly, and catching it before you file your tax return is far easier than amending one afterward.