Quick Answer
A pay stub has three core sections: earnings (gross pay, hours, rate), deductions (taxes, retirement, insurance), and net pay (what hits your bank). Start at the top with gross pay and work down. Each deduction should be labelled with an abbreviation you can decode below.
The simplest formula: Gross Pay minus all Deductions equals Net Pay. If the math does not match, contact payroll immediately.
Every employer in the US is required to provide a pay stub or its electronic equivalent. Save them: stubs are the primary proof of income for loans, leases, and tax disputes.
Why reading your pay stub matters
- Catch payroll errors. Missing overtime, wrong hourly rate, or miscalculated commissions are far more common than people assume.
- Verify benefit deductions. Confirm your insurance premium, retirement contribution, and HSA deposit match what you signed up for.
- Plan your taxes. Year to date totals tell you whether you are on track for a refund or owe more.
- Track real income. The gap between gross and net is large enough that ignoring it leads to wildly inaccurate budgeting.
Section 1: header and identification
The top of every pay stub identifies the employee and the pay period. Confirm each field is correct on your first stub at a new job and again any time your situation changes (address, marital status, dependents).
- Employee name and ID
- Employer name and address
- Pay period start and end dates (the dates you worked)
- Pay date (the date the cheque is issued)
- Filing status and allowances from your W 4 form
Section 2: earnings
The earnings section shows everything you were paid for this period.
- Regular hours and rate: straight time multiplied by your base rate.
- Overtime hours and rate: hours over 40 per week paid at 1.5x your rate (federal minimum; some states have stricter rules).
- Holiday pay, sick pay, vacation pay: separated so you can track accruals.
- Bonus or commission: usually a one off line item.
- Tips: for tipped workers, shown as reported tips.
The sum of every earnings line item equals your gross pay for the period.
Section 3: pre tax deductions
Pre tax deductions come out of gross pay before income taxes are calculated, which lowers your taxable wages.
- 401(k) or 403(b) contributions: retirement savings, typically a percentage of gross pay.
- Health insurance premiums: medical, dental, and vision.
- HSA (Health Savings Account): tax advantaged medical savings.
- FSA (Flexible Spending Account): use it or lose it medical or dependent care funds.
- Commuter benefits: pre tax transit and parking up to the IRS annual cap.
Section 4: taxes
The big three federal taxes appear on every US pay stub.
- Federal income tax (FED or FIT): withheld based on your W 4 and IRS tax tables.
- FICA Social Security (SS or OASDI): 6.2 percent of wages up to the annual wage base (167,700 dollars for 2026).
- FICA Medicare (MED): 1.45 percent of all wages, with an additional 0.9 percent surtax on wages above 200,000 dollars.
Most states also withhold a state income tax, and some cities (NYC, Philadelphia, San Francisco) withhold local income tax. State disability insurance (SDI) and family leave (PFL) appear in a handful of states like California and New York.
Section 5: post tax deductions
Post tax deductions come out after tax calculation and do not lower your taxable income.
- Roth 401(k): retirement contributions that are taxed now and grow tax free.
- Union dues
- Wage garnishments: court ordered withholdings for child support, defaulted student loans, or unpaid taxes.
- Charitable contributions through payroll
- Loan repayments for any company sponsored loans.
Section 6: net pay
Net pay is the dollar amount that hits your bank account or appears on your physical cheque. It equals gross pay minus all pre tax deductions, minus all taxes, minus all post tax deductions.
Multiply your net pay by the number of cheques per year (26 for biweekly, 24 for semi monthly, 52 for weekly) to get your true annual take home.
Section 7: year to date totals
The YTD column on the right side of most pay stubs shows the running total of each line item since January 1 of the current year. Use it to:
- Confirm you are on pace to hit your annual 401(k) contribution limit.
- Track total federal withholding for tax planning.
- Verify HSA or FSA contributions against IRS limits.
- Catch any large discrepancies from your expected annual salary.
Common pay stub abbreviations
- YTD: Year to Date
- REG or RT: Regular wages
- OT: Overtime
- HOL: Holiday pay
- VAC: Vacation pay
- FED, FIT, FWT: Federal Income Tax
- SS or OASDI: Social Security tax
- MED or FICA MED: Medicare tax
- SIT or ST: State Income Tax
- SUI or SDI: State Unemployment or Disability Insurance
- 401K: Pre tax retirement contribution
- HSA, FSA: Health Savings or Flexible Spending Account
- INS, MED, DEN, VIS: Insurance premiums (medical, dental, vision)
- GARN: Wage Garnishment
FAQs
What if my net pay does not match my deposit?
Match the deposit to the net pay on the most recent stub. If there is a gap, your bank may be holding the deposit, or your employer may have issued a correction. Email payroll with the stub date and amount.
How long should I keep my pay stubs?
Keep monthly stubs for at least one year, and the final stub of every year permanently for tax reference. Many people now download digital PDFs straight from the employer portal.
What is the difference between exempt and non exempt?
Exempt employees are salaried and not entitled to overtime under the Fair Labor Standards Act. Non exempt employees are paid hourly and earn overtime for hours over 40 per week.
Why is my first pay stub at a new job missing taxes?
Some employers do not finish W 4 processing in time for the first cheque, so taxes catch up on the second one. Confirm with payroll if it persists past the second pay period.
The takeaway
Read your stub top to bottom every pay period for a minute. Confirm gross pay matches the hours and rate you expect, scan deductions for surprises, and verify net pay matches the deposit. The whole audit takes 60 seconds and catches errors before they snowball.
