Question 1

What is the "Gross pay" line on a paystub?

Accepted Answer

Your total earnings for this pay period before anything is taken out. It is the starting number. Every tax and deduction below comes out of this. Nowhere yet. It is what you earned; the lines beneath it show what happens to it. When a job offer names a salary, it means this number, not what lands in your account.

Question 2

What is the "Federal income tax withheld" line on a paystub?

Accepted Answer

A prepayment toward the federal income tax you will owe for the year. Your employer withholds it each payday based on the W-4 you filled out when hired. The W-4 tells them roughly how much to hold back. To the IRS, credited to your account. At tax time it is compared to what you actually owe: too much withheld means a refund, too little means a bill.

Question 3

What is the "Social Security tax" line on a paystub?

Accepted Answer

A payroll tax of 6.2% of your wages, up to an annual wage cap set each year (the Social Security wage base). It is a required federal payroll tax that funds Social Security. Your employer pays a matching amount you never see on the stub. To the Social Security trust funds, which pay retirement, disability, and survivor benefits. Once your wages pass the annual cap, this line stops for the rest of the year.

Question 4

What is the "Medicare tax" line on a paystub?

Accepted Answer

A payroll tax of 1.45% of all your wages, with no wage cap. It is a required federal payroll tax that funds Medicare. Higher earners also pay an extra 0.9% on wages above $200,000, and your employer matches the base 1.45%. To the Medicare trust fund, which pays for hospital and medical coverage for people 65 and older and some others.

Question 5

What is the "State income tax withheld" line on a paystub?

Accepted Answer

A prepayment toward your state income tax, if your state has one. Most states tax income and have their own withholding form. A handful of states have no income tax, so this line is zero or missing there. To your state's tax agency, credited to your account, and reconciled when you file your state return.

Question 6

What is the "401(k) contribution" line on a paystub?

Accepted Answer

Money you chose to move from this paycheck into your workplace retirement account. You set the amount or percentage with your plan. A traditional 401(k) contribution comes out before income tax is figured, which lowers the wages your federal (and often state) tax is calculated on. Into your own retirement account with the plan's provider. It is still your money; you are moving it, not spending it. If your employer matches, that match is added separately.

Question 7

What is the "Health insurance premium" line on a paystub?

Accepted Answer

Your share of the cost of the health plan you enrolled in through work. Your employer usually pays most of the premium and takes your share out of each check. It is often taken pre-tax, which also lowers your taxable wages. To the insurance carrier, combined with your employer's share, to pay for your coverage. The amount resets at open enrollment, which is one reason that window is on our Money Calendar.

Question 8

What is the "HSA contribution" line on a paystub?

Accepted Answer

A Health Savings Account contribution: money set aside pre-tax for medical costs. It is the rare account that is pre-tax going in, untaxed as it grows, and untaxed coming out for qualified medical spending. You elected it, and contributing requires a high-deductible health plan. Like a traditional 401(k), it comes out before income tax is figured, so it lowers your taxable wages. Into your own HSA with the plan's custodian. Unspent money rolls over year to year and stays yours; it is not a use-it-or-lose-it FSA.

Question 9

What is the "Net pay (take-home)" line on a paystub?

Accepted Answer

What is left after every tax and deduction above. This is the amount that reaches your bank. It is the bottom line of the stub: gross pay minus federal tax, Social Security, Medicare, state tax, your 401(k), your health premium, and your HSA. On this sample stub, 68 cents of every gross dollar. To you, by direct deposit or check. This is the only number your budget can actually spend.

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