How to read a pay stub: gross pay, taxes, deductions and net pay

The short answer: to read a pay stub, start at the top: check your name, pay period and pay date, find gross pay, then go through pre-tax deductions, taxes and after-tax deductions. What's left is net pay, the amount that lands in your bank account.

• Budget with net pay, not gross pay
• Taxes: federal income tax, Social Security, Medicare and any state or local tax
• Pre-tax deductions: 401(k), health premiums, HSA and FSA
• Check for mistakes: hours, pay rate and overtime rate, and nothing new or missing since last check
• Next step: Plan it with the Paycheck Budget Spreadsheet ($5.99).

To read a pay stub, start at the top and work down. Check that your name, the pay period and the pay date are right. Next, find gross pay: everything you earned before anything comes out. Then go through the deductions: pre-tax benefits like a 401(k) or health insurance, taxes (federal income tax, Social Security, Medicare and any state or local tax) and after-tax deductions. What's left is net pay, the amount that actually lands in your bank account. Net pay is the number your budget should be built on.

Below: every section of a typical stub, an abbreviations decoder, a worked example with real math, a mistake checklist, and how to budget from net pay. Every dollar amount is an example, so swap in your own numbers.

What's on a pay stub?

Most pay stubs, paper or in a payroll app, have the same six parts, even when the labels differ.

Surprisingly, federal law doesn't require a pay stub at all. The U.S. Department of Labor's Fair Labor Standards Act FAQ says employers must keep accurate records of hours worked and wages paid, but the FLSA does not require them to give employees pay stubs. Many states do, so if you aren't getting one, check your state labor department's rules and ask payroll or HR.

How to read a pay stub, line by line

Step 1: Check your personal info and pay period

Make sure your name and address are right, since your W-2 comes from the same payroll record. Then check the pay period dates. If a week is wrong or missing, everything below it will be off too.

Step 2: Read the earnings section and find gross pay

Each type of pay gets its own line, usually with hours, a rate and an amount:

• Regular (REG): your normal hours times your hourly rate, or your salary divided by the number of pay periods.
• Overtime (OT): hours over 40 in a workweek. For covered, nonexempt workers, federal law requires at least one and a half times your regular rate.
• PTO, bonus, commission or tips: each on its own line.

Add them up and you get gross pay, your salary divided into pay periods. A salary of $52,000 paid biweekly works out to $2,000 gross per paycheck ($52,000 ÷ 26). That's not what you take home, and planning around it is the most common budgeting mistake.

Step 3: Find your pre-tax deductions

Pre-tax deductions come out of your gross pay before some or all taxes are figured, which lowers your taxable wages. The most common:

• Traditional 401(k) or 403(b): lowers the wages used for federal income tax, but Social Security and Medicare are still taken on it.
• Health, dental and vision premiums through a cafeteria (Section 125) plan: usually lower the wages used for income tax and FICA.
• HSA and FSA contributions made through payroll: generally the same treatment as cafeteria-plan premiums.
• Commuter benefits: transit and parking benefits taken pre-tax.

That's why a stub may show different federal, Social Security and Medicare "wages" numbers. They're not errors; each tax uses its own base.

Step 4: Read the tax withholding lines

Federal income tax (FED, FIT or FWT) is an estimate of your yearly income tax, spread across your paychecks. Your employer figures it from the Form W-4 you filled out and IRS withholding tables. If your refund is always huge, or you always owe, this is the line to adjust.

FICA stands for the Federal Insurance Contributions Act. It's two taxes, and they often show up as two lines:

The IRS lays out these rates in Topic No. 751, Social Security and Medicare withholding rates: 6.2% each for employee and employer for Social Security, 1.45% each for Medicare, and the extra 0.9% Additional Medicare Tax on wages over $200,000. Your employer separately matches the regular Social Security and Medicare taxes; the IRS says there is no employer match for Additional Medicare Tax. The Social Security Administration publishes the yearly wage cap on its contribution and benefit base page. If you earn above the cap, the Social Security line drops to $0 late in the year and your checks get bigger. To see what that tax pays for later, read our guide to Medicare.

State and local tax (SIT, LOC, CITY) depends on where you live and work. Some states have none; some cities add their own. A few states also take disability (SDI), paid family leave (PFL) or unemployment (SUI) contributions.

Step 5: Read after-tax deductions

After-tax deductions come out once taxes have been figured, so they don't lower your taxable wages. Common ones are Roth 401(k) contributions, union dues, extra life or disability insurance you chose, payroll charitable giving and garnishments such as child support. If you see a garnishment you weren't expecting, ask payroll for the paperwork right away.

Step 6: Confirm net pay and the deposit

Net pay is gross pay minus every tax and deduction. If you split direct deposit (DD) between accounts, each amount is listed. Make sure the total that arrived matches net pay to the cent.

Step 7: Read the YTD column

Every line has a year-to-date (YTD) total: what you've earned or paid on that line since January 1 (or since you started, if later). YTD federal withholding shows how much tax you've already prepaid. YTD 401(k) shows how close you are to your savings goal. And your last stub of the year should line up with the W-2 you get in January.

Pay stub abbreviations decoder

Here are the abbreviations you're most likely to see. Labels vary, so if one isn't clear, ask payroll or HR.

See a holiday line on your stub? Our guide to holiday pay explains how holiday hours and premium rates are usually calculated.

Worked example: reading a biweekly pay stub

Here's an example stub for someone paid $25 an hour, 80 hours, every two weeks. The federal and state withholding amounts are made-up examples. Yours depend on your W-4, your state and IRS tables.

Paid on the 15th and the last day of the month instead? See our guide to semi monthly pay, which shows how each check is figured from a yearly salary.

Notice three things. First, FICA is figured on $1,920, not $2,000, because the medical premium is exempt but the 401(k) isn't. Second, federal tax is figured on $1,820, because both pre-tax deductions come off first. Third, this person "makes $2,000 a paycheck" but takes home about 74% of it. A budget built on $2,000 would be short more than $500 every payday.

How to check your pay stub for mistakes

Run this two-minute checklist every payday.

• Hours and rate match your schedule or timesheet (an army time chart helps if your time clock uses 24-hour times)
• Overtime is listed and paid at the right rate
• PTO you used shows up, and your PTO balance (if listed) went down by the right amount
• No new deduction you didn't sign up for
• Benefit amounts match your enrollment (especially after open enrollment in January)
• State and local taxes are for the place you actually live and work
• Net pay matches your bank deposit
• YTD totals went up by exactly this period's amounts

If something's off, raise it with payroll in writing and keep a copy. Keep stubs until you've matched them to your W-2. Our guide on how long to keep documents covers what to keep after that.

Also check your withholding once a year. The IRS recommends using its Tax Withholding Estimator every January and after big life changes like a new job, marriage, a new baby or a home purchase. It asks for your most recent pay stubs and can give you a pre-filled Form W-4.

Why the pay stub may not match one bank deposit

Start with the net pay line for this pay period, then compare it with all the payments issued for that payday. A year-to-date total or taxable-wages line is not the amount you should expect in one deposit. Check the pay date as well as the date range worked: a payroll period can end before the payment reaches your account.

For an illustrative split deposit, a stub with $1,500 net pay might direct $1,200 to checking and $300 to savings. Neither deposit alone equals net pay; together they do. Do not enter $1,500 as income and then count the $300 transfer again as additional income in your budget.

A payroll question that is easy to investigate

Send payroll the pay date, pay-period dates, the line label, expected amount and amount shown. For an hours issue, include your approved timesheet or schedule. For a deduction issue, include the benefit election or payroll notice you are comparing with the stub. Use a secure employer channel and avoid sending a full Social Security number or bank account number in ordinary email.

A useful message is: "For the November 13 pay date, the current-period deduction labeled ___ is ___. My election shows ___. Please confirm the calculation and how any correction will be paid." This is a message template, not a promise that a correction will appear on the next check.

Keep the disputed amount out of your available spending until the correction is actually paid. The guide to organizing bills helps you cover due dates while an issue is being resolved, and the paycheck budgeting guide explains how to assign the net amount you have received.

Gross vs. net pay: which one do you budget with?

Budget with net pay, always. Gross pay is useful for loan applications, rent checks and retirement percentages. Net pay is what you can actually spend.

Need a monthly figure for a rental or loan application? See gross monthly income for the formulas for salary, hourly and other pay.

If your net pay changes from check to check (hourly shifts, overtime, commissions), budget from your lowest normal net pay of the last few months. Treat anything above it as extra for savings or debt. Our guide to budgeting with irregular income goes deeper on that.

How to budget your paycheck from your pay stub

Once you know your real net pay, here's the short version:

1. Write down net pay per paycheck. Use the bottom line, not the salary. In the example, that's $1,477.12.
2. Know your pay schedule. Biweekly means 26 paychecks a year, so two months a year have three. Weekly is 52 and semimonthly is 24. The biweekly budget template guide has full pay calendars.
3. Budget a normal month from two paychecks, not the yearly average. That's $2,954.24 in the example. The yearly average ($38,405.12 ÷ 12 = $3,200.43) would overstate what you have in most months.
4. Assign each bill to the paycheck before its due date, so no single check gets buried. Our paycheck budget planner guide walks through the bill-by-payday method step by step.
5. Give savings a line on every check, even a small one. See pay yourself first.
6. Update your net pay number after any change on your stub, like a raise, new January benefits, the Social Security cap or a new W-4.

To split net pay into categories, try the 50/30/20 budget or a zero-based budget. Both start from take-home pay, not salary.

Why I care about this

I'm Malaysia. I grew up in Detroit as the oldest of three, the one my family leaned on to keep everything coordinated. I've also worked as an executive assistant and as an HR associate. Money stress often starts with a number nobody fully understood, and for most families that number is the pay stub. Once you can read it, you know exactly what you have to work with. It's the first step toward financial wellness.

Budget your take-home pay with the Paycheck Budget Spreadsheet

The Paycheck Budget Spreadsheet ($5.99) is built around the number at the bottom of your pay stub. You enter your usual take-home pay, your pay frequency and your first pay date once, and it:

• works for weekly, biweekly, semimonthly or monthly pay and calculates your pay dates for the year
• lets you record the actual net pay from each stub when it differs from usual
• schedules your bills for 12 months and assigns each one to the paycheck before it's due
• shows bills due, savings and left-to-spend for every paycheck, with paid checkmarks

It works in Excel and Google Sheets. Want the full system? The Ultimate Budget Bundle ($19.99, $46.42 if bought separately) includes the Paycheck Budget Spreadsheet plus the annual, zero-based, debt payoff, bill tracker and sinking funds spreadsheets and two printables. Browse every template in Spreadsheets or see all sets in Bundles. For the holidays, grab the free Holiday Budget Starter Kit: three US Letter pages, emailed after you join our list.