Gross Pay vs. Net Pay
Every paystub starts with gross pay — the total amount you earned before any taxes or deductions. Net pay (sometimes called "take-home pay") is what actually lands in your bank account after all deductions are subtracted.
Understanding the path from gross to net pay is the key to reading your paystub. The difference between those two numbers is made up of mandatory taxes and voluntary deductions.
Mandatory Tax Deductions
Federal Income Tax Withholding
Federal income tax is based on the information you provided on your Form W-4 (filing status, dependents, and any extra withholding). Your employer sends this amount to the IRS on your behalf throughout the year.
At tax time, the total federal tax withheld on your W-2 is compared to your actual tax liability on your return. If too much was withheld, you get a refund. If not enough, you owe the difference.
State and Local Income Tax
Many states and some cities impose their own income taxes. These appear on your paystub as state and local tax withholdings. Not all states have income tax, so these lines may be blank if you live in a no-tax state.
Social Security (FICA)
Social Security tax is part of FICA (Federal Insurance Contributions Act). For most employees, 6.2% of taxable wages is withheld for Social Security, up to the annual wage base limit. Your employer matches this amount and sends both to the Social Security Administration.
Medicare (FICA)
Medicare tax is the other part of FICA. Employees pay 1.45% of all taxable wages for Medicare, with no wage cap. High earners may see an additional Medicare surtax above certain income thresholds.
Pre-Tax vs. Post-Tax Deductions
Some deductions are taken out of your pay before taxes are calculated (pre-tax), which can lower your taxable income. Others are taken after taxes (post-tax).
Common Pre-Tax Deductions
- Health, dental, and vision insurance premiums
- Health Savings Account (HSA) and Flexible Spending Account (FSA) contributions
- Traditional 401(k) retirement contributions
- Commuter and transit benefits in some locations
Because these reduce your taxable income, they can lower your overall tax bill while helping you save for health expenses and retirement.
Common Post-Tax Deductions
- Roth 401(k) contributions
- Garnishments (child support, tax levies, court orders)
- Union dues
- Charitable contributions through payroll
Year-to-Date (YTD) Columns
Year-to-date (YTD) columns show how much you've earned and paid in taxes over the entire year, not just the current pay period. These are essential for:
- Verifying income for loans and rental applications
- Checking that tax withholdings look reasonable
- Monitoring retirement and benefit contributions
Why Accurate Paystub Deductions Matter
Accurate deductions matter for several reasons:
- You avoid unpleasant surprises at tax time
- Lenders and landlords rely on paystubs to verify income
- Benefits like retirement and health insurance depend on correct contributions
- Errors can be signs of payroll or classification issues
How MakePaystubPro Helps
MakePaystubPro simplifies this complexity by clearly separating gross pay, taxes, deductions, and net pay on every paystub. Our templates show:
- Itemized tax withholdings (federal, state, Social Security, Medicare)
- Pre-tax vs. post-tax deductions
- Current period and year-to-date totals
- Net pay after all deductions
When you generate a paystub with MakePaystubPro, you get a professional, easy-to-read breakdown that lenders, landlords, and HR departments understand and trust.