How to Read a Pay Stub

How to Read a Pay Stub

Understanding how to read a pay stub and putting that knowledge to work is just as important the day you receive your first paycheck as it is the day you retire. Your pay stub contains a lot more information than just the money you can expect to receive that pay period — although that is the most exciting part!

Keep reading to learn how to read a pay stub and why doing so correctly is such an important part of improving your overall finances.

What Information Is on My Pay Stub?

When learning how to read a pay stub, it is helpful to break the information down into three major sections:

  1. Gross Pay
  2. Deductions
  3. Net Pay


Gross Pay

Gross pay is the amount of money you have earned before taxes, benefits, and other deductions are removed. You’ll see two references to gross pay:

  1. How much you earned for this specific pay period
  2. How much you have earned so far this calendar year (year-to-date)



Everyone’s least favorite part of the pay stub is the money withheld from gross pay. There are several reasons money is deducted from your paycheck.


  • Federal Income Tax: How much money withheld per pay period to pay federal income tax (FIT) depends on the W-4 form you filled out for your employer. Factors like marital status, income level, and number of allowances claimed are considered in determining how much you pay in annual federal income tax.


  • State Income Tax: The percentage of money withheld for state income tax (SIT) varies by state. Maryland’s SIT rates are based on income level. Depending on where you work, you might see a city income tax deduction on your pay stub.


  • Federal Insurance Contributions Act (FICA): All employees in the United States are required to contribute 6.2% of their earnings to fund Social Security and 1.45% to fund Medicare. Employers are also required to match those contributions on behalf of their employee — meaning that a self-employed person will see a 12.4% contribution to Social Security and a 2.9% contribution to Medicare. These are often denoted on a pay stub as “FICA-SS” and “FICA-Med.”


  • Benefit Withholding: If you have elected to receive any retirement or health benefits from your employer, you will likely see portions of your pre-tax gross pay withheld to contribute to those areas. If your employer puts money toward health or retirement accounts on your behalf, you will see that listed on your pay stub under “employer contributions.”


Net Pay

Net pay is how much money you’ll be receiving after the deductions from your gross pay. It’s typically the eye-catching bolded number. Your pay stub will show your net pay both for that pay period and year to date.

Additionally, your pay stub includes details such as pay period, the date the paycheck was issued, any paid time off, overtime hours worked, and employee identification information.


RELATED: Why Hire a Tax Attorney?

Why Is Knowing How to Read a Pay Stub Important?

Whether you view your pay stub online or you receive a physical copy, looking it over each pay period helps to prevent any errors in your pay, withholdings, and benefits. As the employee, you are responsible for your pay stubs and ensuring they are free from mistakes.

Here are potential tax issues on your pay stub to keep an eye out for:

  • Incorrect Withholdings: If the amount of money withheld for federal income tax is too high per pay period, you are losing out on the amount of money you’re taking home each pay period (though it will be reimbursed in the form of a tax return after your taxes are filed). If the amount of money being withheld is too low, you will owe taxes after filing, which is never a welcome surprise.


  • Hourly Pay and Overtime Inaccuracies: Hourly workers should check the number of hours they worked within the pay period against the number of hours reflected on their pay stub. Additionally, ensure that any overtime hours worked are calculated correctly at the appropriate rate — whether that is time and a half or double time.


  • Accrual Rate Discrepancies: If your vacation time or other benefits are calculated based on time you have worked, ensure your benefits are increasing at the rate they are supposed to. This is especially true if your accrual rate has recently changed. (Say, your vacation time increases after one year at the company.)


  • Raises Not Accounted For: You got a raise! Congratulations! Make sure your raise is reflected beginning in the pay period your employer says it will be effective.


Once you know how to read a pay stub, you will be able to pick up on any inaccuracies that could impact your earnings. Address any potential pay stub problems with your payroll manager to have them fixed as soon as possible.


Pay Stub Not Adding Up? S.H. Block Tax Services Is Here to Help!

If you’re seeing problems with your pay stub that your employer can’t (or won’t) fix, S.H. Block Tax Services can help you sort it out. With over 100 years of combined tax law experience, our firm is here to ensure you’re not losing out on your hard-earned money.

Please give us a call at (410) 872-8376 or fill out the form above to schedule your free consultation.


The content provided here is for informational purposes only and should not be construed as legal advice on any subject.


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