Pay Stub Deductions Explained -- Every Line Item

Your pay stub lists a column of deductions between gross pay and net pay. Some are mandatory — the government takes them regardless of what you elect. Others are voluntary — you chose them during open enrollment or when you set up your retirement account. Each one has different rules about what income it reduces, and understanding that distinction is worth real money.

This guide covers every deduction type you're likely to see on an American pay stub, with 2024 limits and specific dollar examples showing what each actually costs you in take-home pay.

Mandatory Deductions: No Choice Here

Federal Income Tax (FIT / FWT)

Federal income tax is withheld from every paycheck based on your W-4 elections and IRS withholding tables. The 2024 marginal tax brackets for single filers:

Your employer annualizes your paycheck gross, applies the standard deduction ($14,600 single/$29,200 married for 2024), and calculates your estimated annual tax liability. That amount divided by your pay periods equals your withholding per stub.

Key point: tax brackets are marginal. A $60,000 earner does NOT pay 22% on their whole income — they pay 10% on the first $11,600, 12% on the next chunk, and 22% only on earnings above $47,150 (after the standard deduction). Their effective rate is around 12–13%, not 22%.

Social Security Tax (OASDI)

Rate: 6.2% of gross wages
2024 wage base: $168,600 (withholding stops when you cross this)
Label on stub: "OASDI," "Social Security," "SS Tax," "Soc Sec"

Example: $3,500 bi-weekly gross × 6.2% = $217.00 per period.

Your employer pays an additional 6.2% — 12.4% total goes to Social Security, but only your half appears on your stub. Full FICA breakdown here.

Medicare Tax

Rate: 1.45% of ALL wages (no wage base cap)
Additional Medicare Tax: 0.9% on wages over $200,000 (single)/$250,000 (married)
Label on stub: "Medicare," "Med Tax," "Medicare Tax"

Example: $3,500 bi-weekly gross × 1.45% = $50.75 per period.

If your earnings exceed $200,000, your employer starts withholding an extra 0.9% ($1.45% + 0.9% = 2.35%) on wages above the threshold. Your employer contributes 1.45% on their side with no additional match on the 0.9% portion.

State Income Tax (SIT / SWT)

Rate varies by state (0% to 13.3%). Nine states with no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.

Examples at $3,500 bi-weekly:

• California (effective ~6% at $91k/yr): $210.00
• New York (effective ~5.5% at $91k/yr): $192.50
• Illinois (flat 4.95%): $173.25
• Texas: $0.00

State-Specific Mandatory Deductions

Beyond state income tax, several states require additional withholdings:

California SDI (State Disability Insurance):
Rate: 0.9% of wages (2024). No wage base cap since 2024.
$3,500 × 0.009 = $31.50/period
Funds California's disability insurance and paid family leave programs.

Oregon Statewide Transit Tax:
Rate: 0.1% of wages
$3,500 × 0.001 = $3.50/period
Funds TriMet and Lane Transit District.

Washington WA Cares Fund (Long-Term Care/PFML):
Rate: 0.58% of wages
$3,500 × 0.0058 = $20.30/period
Funds Washington's long-term care insurance program.

New York SDI:
Rate: $0.60/week (cap), employer may collect from employee
Funds New York's short-term disability program.

New Jersey SDI and FLI:
SDI: 0.14% up to $161,400 wage base
FLI: 0.06% of wages
Funds New Jersey's disability and family leave programs.

Pre-Tax Voluntary Deductions: These Save You Money

Pre-tax deductions reduce your gross wages before federal income tax is calculated. Some also reduce FICA wages. The tax savings are real and significant.

Traditional 401(k) / 403(b) Contributions

2024 limits:
Under 50: $23,000/year maximum
Age 50+: $30,500/year (additional $7,500 catch-up)
403(b) plans (for nonprofits/schools) have the same limits.

Tax treatment: Reduces federal and state income tax wages. Does NOT reduce Social Security or Medicare wages.

Dollar impact example: Contributing $500/period to a 401(k) at a 22% marginal rate saves you approximately $110 in federal income tax (22% × $500) per period. Your net pay drops by $390, not $500 — you're effectively getting a 22% discount on retirement savings.

Contributing $23,000/year to a traditional 401(k) at a 22% bracket saves $5,060 in federal income tax annually. After state tax savings (varies), the real cost of maxing out your 401(k) might be $16,000–$17,000 in reduced take-home, not $23,000.

Health Insurance Premiums (Section 125 / Cafeteria Plan)

Tax treatment: Reduces federal income tax wages AND FICA wages (Social Security and Medicare). This is more tax-efficient than a 401(k).

Dollar impact example: A $300/period health insurance premium at 22% marginal rate saves:

• $66 in federal income tax (22% × $300)
• $18.60 in Social Security (6.2% × $300)
• $4.35 in Medicare (1.45% × $300)
• Total tax savings: ~$89 per period

Your net pay drops by $211, not $300, for $300 of health coverage. The employer's premium contribution (usually 70–80% of total premium) doesn't appear on your stub at all.

Health Savings Account (HSA)

2024 limits:
Self-only HDHP coverage: $4,150/year
Family HDHP coverage: $8,300/year
Age 55+: additional $1,000 catch-up

Requirement: You must be enrolled in a qualifying High Deductible Health Plan (HDHP). If you switch to a non-HDHP during the year, contributions must stop.

Tax treatment: Reduces federal income tax AND FICA wages — same efficiency as health insurance premiums. HSA funds grow tax-free and withdraw tax-free for qualified medical expenses. It's the only triple-tax-advantaged account in the US tax code.

Dollar impact: A $200/period HSA contribution at 22% marginal rate saves approximately $59 in taxes per period. The money is available tax-free for medical expenses — forever, no expiration.

Flexible Spending Account (FSA)

2024 limits:
Health FSA: $3,200/year
Dependent Care FSA: $5,000/year (household limit)

Tax treatment: Same as HSA — reduces income tax and FICA wages. Key difference: FSA funds have a "use it or lose it" rule. Unused funds expire at year-end (some plans allow a $610 carryover or a 2.5-month grace period).

Use FSA for: Predictable medical expenses — glasses, contacts, dental work, copays. Don't over-contribute; the forfeiture is real.

Life Insurance (Up to $50,000 Coverage)

Employer-provided group term life insurance up to $50,000 of coverage is a tax-free benefit — no deduction on your stub, no income imputed.

Coverage above $50,000 creates "imputed income" — the IRS requires you to pay tax on the value of the employer-paid premium for coverage over $50,000. This shows up on your stub as a taxable addition to income (it increases your taxable wages without increasing your actual cash compensation).

Commuter Benefits

2024 limits: $315/month for transit/vanpool, $315/month for parking

Tax treatment: Reduces income tax wages. Employer-provided transit passes above this limit are taxable.

Post-Tax Deductions: These Don't Save on Current Taxes

Post-tax deductions come out after all taxes are calculated. They don't reduce your current taxable income, but some (like Roth 401(k)) reduce your future taxes.

Roth 401(k) Contributions

Same contribution limits as traditional 401(k): $23,000/year (2024).

Tax treatment: Contributions are post-tax — they don't reduce your current taxes. However, withdrawals in retirement are completely tax-free, including earnings. Compare to traditional 401(k): you pay tax now vs. in retirement.

Which is better? Roth if you expect higher taxes in retirement (younger workers, people expecting higher income). Traditional if you expect lower taxes in retirement. Many financial advisors recommend diversifying between both.

After-Tax Life Insurance Premiums

Premiums for voluntary life insurance above the employer-provided group coverage, or for supplemental plans you elected during open enrollment. These are post-tax — no current tax savings.

Charitable Payroll Deductions

Many employers allow charitable contributions through payroll (United Way campaigns, employer-matched giving programs). These are post-tax deductions from payroll — they don't reduce your income tax directly through withholding, though you can claim them as itemized deductions at tax time if you itemize.

Wage Garnishments

Court-ordered deductions for child support, student loan default, or creditor judgments. These are post-tax (they don't reduce taxable income) and are mandatory regardless of your preference. Federal law limits how much can be garnished: generally 25% of disposable income or the amount by which disposable income exceeds 30 times the federal minimum wage, whichever is less.

Why Pre-Tax vs. Post-Tax Matters: Dollar Comparison

The difference in tax treatment creates a real, calculable difference in take-home pay. Let's compare two employees, each contributing $500/period to retirement — one traditional 401(k), one Roth 401(k). Both are in the 22% federal bracket:

The traditional 401(k) contributor takes home approximately $110 more per period ($500 × 22% tax savings). But the Roth contributor's withdrawals in retirement are tax-free, while the traditional contributor pays income tax on every withdrawal.

For 2024 tax purposes, the right choice depends on your income trajectory, expected retirement tax rate, and how long you have until retirement.

YTD and Deduction Tracking

Every deduction shows a YTD column alongside the current period. This matters for:

• 401(k) limit tracking: Your payroll system should automatically stop contributions when you hit $23,000 YTD, but verify
• Social Security wage base: SS withholding stops at $168,600 YTD gross earnings
• HSA contributions: Can't exceed $4,150/$8,300 annually; your employer's contributions plus yours count toward this limit

See our YTD guide for the full explanation of what these running totals mean and how lenders use them for income verification.

What's NOT a Deduction (But Affects Your Stub)

A few items affect your stub without being deductions from your gross pay:

• Employer 401(k) match: Your employer's contribution doesn't appear as a deduction — it's extra money going into your account. It may appear as an informational line on some stubs.
• Imputed income: Life insurance above $50,000, personal use of a company car, certain moving allowances — these appear as additions to your taxable wages, increasing what you owe in taxes without increasing your cash pay.
• Employer-paid benefits: Your employer's share of health insurance, FICA, workers' comp — none of this appears on your stub. It's compensation you're receiving that you never see or touch.

For a complete walkthrough of every field on a pay stub with worked dollar examples from gross to net, start with our main pay stub explainer. And if you need to generate a pay stub documenting your real income as a self-employed person or gig worker, IncomeRecord.com handles the calculations automatically.