If you've ever looked at your pay stub and wondered "why is my take-home pay so much lower than my salary?" — you're not alone. The gap between gross pay and net pay comes down to deductions: the taxes, insurance premiums, retirement contributions, and other withholdings that are subtracted before your money hits your bank account.
Understanding what deductions should be on your pay stub helps you verify your paycheck is accurate, optimize your tax strategy, and make smarter decisions about benefits. Whether you're reviewing your own paycheck or creating pay stubs for income documentation, this guide covers every deduction you should know about.
Pay Stub Deductions Overview
Every pay stub deduction falls into one of three categories. Understanding these categories is the first step to making sense of your paycheck.
- Federal income tax
- State income tax
- Social Security (6.2%)
- Medicare (1.45%)
- Local/city taxes
Required by law — no opt-out
- 401(k) / 403(b)
- Health insurance
- HSA / FSA
- Dental & vision
- Commuter benefits
Reduce taxable income — tax savings
- Roth 401(k) / Roth IRA
- Life insurance (excess)
- Wage garnishments
- Union dues
- Disability insurance
Taken after taxes are calculated
Required vs. Optional Deductions
Not all deductions are created equal. Some are non-negotiable federal requirements, while others depend entirely on the benefits you elect. Here's how they break down:
These deductions are mandated by federal and/or state governments. Your employer must withhold them.
- Federal Income Tax (FIT)
Based on W-4, income, filing status
- Social Security Tax (OASDI)
6.2% up to $176,100 (2025)
- Medicare Tax
1.45% on all wages; +0.9% over $200K
- State Income Tax (SIT)
Varies by state (0%–13.3%)
- Court-Ordered Garnishments
Child support, student loans, tax levies
These are deductions you choose during benefits enrollment. You can usually change them during open enrollment.
- 401(k) / 403(b) Contributions
Traditional or Roth; you set the %
- Health Insurance Premiums
Medical, dental, vision
- HSA / FSA Contributions
Pre-tax health savings
- Life & Disability Insurance
Supplemental coverage you elect
- Union Dues
Required if in a union shop
Mandatory Tax Deductions Explained
These are the deductions every W-2 employee in America sees on their pay stub. They're withheld by your employer and sent directly to the government on your behalf.
1Federal Income Tax (FIT)
Federal income tax is your single largest deduction. The amount withheld depends on the information you provided on your W-4 form, including your filing status and any adjustments.
2025 Federal Tax Brackets (Single Filer)
| Tax Rate | Taxable Income Range |
|---|---|
| 10% | $0 – $11,925 |
| 12% | $11,926 – $48,475 |
| 22% | $48,476 – $103,350 |
| 24% | $103,351 – $197,300 |
| 32% | $197,301 – $250,525 |
| 35% | $250,526 – $626,350 |
| 37% | $626,351+ |
2State Income Tax (SIT)
Most states impose their own income tax on top of federal tax. Rates vary dramatically — from 0% in states like Texas and Florida to over 13% in California for top earners.
No State Income Tax (9 States)
- • Alaska
- • Florida
- • Nevada
- • New Hampshire*
- • South Dakota
- • Tennessee
- • Texas
- • Washington
- • Wyoming
*NH taxes only investment income
Highest State Tax Rates
- • California: up to 13.3%
- • Hawaii: up to 11%
- • New Jersey: up to 10.75%
- • Oregon: up to 9.9%
- • Minnesota: up to 9.85%
- • New York: up to 10.9%
Some cities add local taxes on top
Check your state-specific pay stub requirements: California, Texas, Florida, New York
3FICA: Social Security + Medicare
FICA (Federal Insurance Contributions Act) is the combined Social Security and Medicare tax. It's split evenly between you and your employer — you each pay 7.65%.
Social Security
Rate: 6.2% (employee share)
2025 Wage Cap: $176,100
Max Annual Tax: $10,918.20
Once your YTD earnings hit $176,100, Social Security withholding stops for the rest of the year.
Medicare
Rate: 1.45% (employee share)
Wage Cap: None — all wages taxed
Additional Tax: +0.9% on earnings over $200K (single) or $250K (married filing jointly)
The additional 0.9% is only paid by the employee, not matched by the employer.
FICA Calculation Example (Biweekly Pay, $60K/year)
4Local & City Taxes
Some cities and counties levy their own income taxes in addition to state tax. If you work or live in one of these jurisdictions, you'll see an additional line item on your pay stub.
New York City
3.078% – 3.876%
Philadelphia
3.75% (residents)
Detroit
2.4% (residents)
San Francisco
Payroll tax varies
Columbus, OH
2.5%
St. Louis
1% earnings tax
Pre-Tax Deductions: Lower Your Tax Bill
Pre-tax deductions are subtracted from your gross pay before income taxes are calculated. This means every dollar you contribute pre-tax reduces your taxable income — saving you money on federal, state, and sometimes FICA taxes.
The most powerful wealth-building deduction on your pay stub. Traditional 401(k) contributions are pre-tax, reducing your taxable income now while your money grows tax-deferred.
- 2025 Limit: $23,500 (under 50)
- Catch-up (50+): Additional $7,500
- Employer match: Free money — always contribute enough to get the full match
Tax Impact Example
Most employer-sponsored health insurance premiums are deducted pre-tax under Section 125 "cafeteria plans." This includes medical, dental, and vision coverage.
| Coverage Level | Avg. Monthly Employee Premium (2025) | Per Paycheck (Biweekly) |
|---|---|---|
| Employee Only | $105 – $160 | $49 – $74 |
| Employee + Spouse | $270 – $450 | $125 – $208 |
| Employee + Family | $450 – $700 | $208 – $323 |
Employer contribution averages 83% for individual coverage and 73% for family plans. These costs don't appear on your pay stub — only your share does.
Health Savings Account (HSA)
- Requires: High-deductible health plan (HDHP)
- 2025 Individual Limit: $4,300
- 2025 Family Limit: $8,550
- Triple Tax Advantage: Pre-tax in, tax-free growth, tax-free withdrawals for medical expenses
- Rolls over: Year to year — no expiration
Flexible Spending Account (FSA)
- Requires: Any health plan (or standalone)
- 2025 Limit: $3,300
- Dependent Care FSA: $5,000
- Use-it-or-lose-it: Funds generally expire at year-end (some employers offer $640 rollover or 2.5-month grace period)
Post-Tax Deductions
Post-tax deductions are subtracted after income taxes are calculated. They don't reduce your current tax bill but may offer other advantages.
Contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free — including all growth.
Best for: younger workers expecting higher future tax ratesEmployer-paid life insurance over $50,000 in coverage is considered taxable income (called "imputed income"). You may see a post-tax deduction for the premium on the excess amount.
Look for: GTL or Group Term Life on your stubCourt-ordered deductions for child support, unpaid student loans, tax levies, or creditor judgments. These are involuntary and must be withheld by your employer.
Federal limit: up to 25% of disposable earnings for creditorsUnion membership fees, charitable contributions via payroll giving, after-tax disability insurance premiums, and employee stock purchase plan contributions.
Post-tax: no current tax benefitHow Each Deduction Is Calculated (With Examples)
Let's walk through a complete pay stub calculation for a worker earning $70,000/year, paid biweekly, single filer, living in a state with 5% income tax. They contribute 6% to their 401(k) and pay $120/month for health insurance.
Understanding Your Take-Home Pay
Your take-home pay (net pay) is what actually lands in your bank account. It's the amount remaining after every mandatory and voluntary deduction has been subtracted. Here's how typical deduction percentages break down across different salary levels:
| Annual Salary | Typical Tax Burden | Typical Benefits | Approximate Take-Home % |
|---|---|---|---|
| $35,000 | 18–22% | 3–8% | 70–79% |
| $55,000 | 22–26% | 5–10% | 64–73% |
| $80,000 | 24–29% | 5–12% | 59–71% |
| $120,000 | 27–33% | 5–12% | 55–68% |
Common Deduction Errors to Watch For
Payroll errors are surprisingly common and can cost you hundreds or thousands over time. Review your deductions carefully every pay period — especially after life changes, open enrollment, or raises.
Got married, had a baby, or bought a house? Your tax situation changed, but if you didn't update your W-4, you may be withholding too much or too little. Use the IRS Withholding Estimator to check.
After open enrollment changes or switching plans, some payroll systems accidentally charge the old and new premium for a pay period or two. Compare your deduction amount to the premium listed in your benefits enrollment confirmation.
If your 401(k) is set to a flat dollar amount (not a percentage), a raise won't increase your contributions. If it's set to a percentage, verify the new dollar amount is correct after salary changes.
If you earn over $176,100 (2025), Social Security should stop being withheld once you hit the cap. If it doesn't — especially common when switching employers mid-year — you're being over-deducted. You can claim the excess back on your tax return, but it's better to catch it early.
Remote workers and people who recently relocated sometimes have taxes withheld for the wrong state. Make sure your employer has your current work state on file, especially if you moved or started working remotely across state lines.
Occasionally, deductions appear for benefits you didn't sign up for — accident insurance, legal plans, or pet insurance add-ons. Review every line item against your enrollment elections, especially after open enrollment.
Frequently Asked Questions About Pay Stub Deductions
Federal income tax, Social Security tax (6.2%), and Medicare tax (1.45%) are required on every paycheck. State income tax is also required unless you work in one of the nine states with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY). These mandatory deductions are determined by law and cannot be opted out of.
Pre-tax deductions (like traditional 401(k) contributions and health insurance premiums) are taken out before taxes are calculated, reducing your taxable income and lowering your tax bill. Post-tax deductions (like Roth 401(k) contributions and some life insurance premiums) are taken out after taxes, so they don't reduce your current tax bill but may offer tax-free withdrawals in the future.
Most employees see 20–35% of their gross pay go to deductions. Mandatory taxes (federal, state, FICA) typically account for 15–25%, while voluntary deductions like health insurance and retirement add another 5–15%. The exact percentage depends on your income level, filing status, state of residence, and benefit elections.
Deductions vary based on several personal factors: your W-4 filing status and adjustments, the health insurance plan you selected (individual vs. family coverage), your retirement contribution percentage, whether you have HSA/FSA contributions, any wage garnishments, and your total income level which determines your tax bracket.
You cannot reduce mandatory deductions like FICA taxes. However, you can adjust federal withholding by submitting a new W-4 to your employer, change voluntary deductions during open enrollment or after a qualifying life event, and strategically use pre-tax deductions like 401(k) and HSA contributions to lower your taxable income and effective tax rate.
FICA stands for the Federal Insurance Contributions Act. It's a combined tax of 7.65% (6.2% for Social Security + 1.45% for Medicare) that funds retirement benefits and healthcare for Americans 65 and older. Your employer pays a matching 7.65% on top of your contribution. Learn more in our complete pay stub reading guide.
If required tax deductions are missing, your employer may not be withholding properly — which could leave you with a large tax bill at year-end. If voluntary deductions you elected are missing (like 401(k) or insurance), contact HR immediately to ensure your benefits are active and contributions are being made.
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Take Control of Your Paycheck
Understanding what deductions should be on your pay stub transforms a confusing document into a powerful financial tool. By knowing the difference between mandatory taxes and elective benefits — and how each one is calculated — you can verify your paycheck is correct, optimize your tax withholding, and make smarter decisions during benefits enrollment.
Whether you're reviewing your own paycheck or need to create professional pay stubs with accurate deductions, the key is understanding where every dollar goes. For a quick and easy way to generate professional pay stubs with all deductions properly calculated, dedicated tools can handle the complex tax math for you.