Reading Paychecks

Paychecks can be confusing — but once you understand each line, you'll know exactly where your money is going and how your take-home pay is calculated.

Gross Pay vs Net Pay

Your paycheck starts with gross pay — your total earnings before any taxes or deductions. After deductions are removed, you’re left with net pay, which is the amount you take home.

Gross Pay = hours × pay rate (or salary portion)
Net Pay = gross pay minus all deductions

The difference between these two amounts is often larger than people expect — deductions add up.

Common Taxes on Your Paycheck

Your paycheck includes several required taxes:

Federal Income Tax — based on your W-4 settings
State Income Tax — depends on your location
Social Security Tax — 6.2% of wages
Medicare Tax — 1.45% of wages

These taxes combined usually take 15–30% of your gross pay depending on your situation.

Pre-Tax Deductions

Some deductions reduce your taxable income before taxes are taken out:

Health insurance premiums
401(k) or retirement contributions
HSA or FSA contributions
Certain commuter benefits

These lower your taxable income, which can increase your take-home pay.

Post-Tax Deductions

These deductions occur after taxes have already been calculated:

Roth retirement contributions
Union dues
Garnishments
Miscellaneous voluntary deductions

Post-tax deductions do not reduce your taxable income but still reduce your take-home pay.

Understanding Year-to-Date (YTD) Numbers

YTD amounts show how much you’ve earned and paid since the beginning of the year.

Total earnings so far
Total taxes paid
Total deductions taken
Retirement contributions YTD

These totals are essential for tax planning and budgeting.