How to Read Your Paycheck
A plain-English guide to gross pay, net pay, payroll taxes and deductions, with a worked example of a biweekly paycheck.
The short version
Your paycheck shows two main numbers: gross pay, which is what you earned before anything is taken out, and net pay (take-home pay), which is what is actually deposited into your account. The difference is made up of taxes and deductions. Understanding each line helps you spot errors and plan your budget.
Common paycheck lines
- Gross pay: your salary or hourly wages for the pay period, including overtime and bonuses.
- Federal income tax: withheld based on your earnings and the information on your Form W-4. This is an estimate of what you will owe for the year.
- State and local income tax: withheld in states and cities that have an income tax.
- Social Security tax: 6.2% of your wages, up to an annual wage limit that changes each year.
- Medicare tax: 1.45% of your wages. Higher earners may pay an additional amount.
- Pre-tax deductions: items such as 401(k) contributions or health insurance premiums, depending on your plan.
- Post-tax deductions: items such as Roth contributions or wage garnishments.
A worked example
Suppose you earn $60,000 per year and are paid every two weeks (26 pay periods). Your gross pay per paycheck is $60,000 / 26 = $2,307.69. The amounts below are illustrative, because actual withholding depends on your W-4, location and benefits.
- Social Security (6.2%): $143.08
- Medicare (1.45%): $33.46
- 401(k) contribution (5%): $115.38
- Federal income tax withheld (example): $190.00
- State income tax withheld (example): $70.00
Total deductions: $551.92. Net pay: $2,307.69 − $551.92 = $1,755.77.
In this example, about 76% of gross pay reaches your bank account. Your own number will differ depending on your tax situation and benefits.
Pay frequency matters
Annual pay divided by the number of pay periods gives your gross pay per check. Weekly pay has 52 periods, biweekly has 26, semi-monthly has 24 and monthly has 12. Biweekly means two months each year with three paychecks, which can help with budgeting if you plan for them.
How to check your paycheck for errors
- Confirm that gross pay matches your salary or your hours multiplied by your rate.
- Check that Social Security and Medicare are close to 6.2% and 1.45% of taxable wages.
- Review each deduction against your benefits enrollment.
- Look at year-to-date totals to catch repeated problems.
- Ask your payroll or HR department if anything looks wrong.
Adjusting your withholding
If you get a large refund every year, too much may be withheld from each paycheck. If you often owe tax at filing time, too little is being withheld. You can update your Form W-4 with your employer. The IRS provides a withholding estimator on its website for this purpose.
Frequently asked questions
Why is my take-home pay less than I expected?
Most people compare their salary to their deposit and forget payroll taxes and benefit deductions. Looking at each deduction line shows where the difference comes from.
Are bonuses taxed more?
Bonuses are taxable income, and they are often withheld at a flat supplemental rate, which can feel high. Your actual tax for the year is settled when you file your return.
What is the difference between pre-tax and post-tax deductions?
Pre-tax deductions reduce the income that is subject to income tax, so they lower your tax bill now. Post-tax deductions come out after taxes are calculated.
Try it yourself
Use our salary and paycheck calculator to estimate your take-home pay from your salary, pay frequency and deductions, and compare it with your actual paycheck.
This guide is for educational purposes only and is not financial, tax, or legal advice.