You earned $2,500. Your bank account didn’t receive $2,500. Welcome to the pay stub. Once you know the sequence, it stops looking like a wall of abbreviations and starts looking like a receipt for your paycheck.
Start at gross pay
Gross pay is what you earned before employee deductions.
Check:
- pay-period dates
- hours
- overtime
- salary or hourly rate
- commissions or bonuses
- retroactive adjustments
If gross pay is wrong, everything below it is built on the wrong number.
Then look at pre-tax deductions
Some benefits reduce certain taxable wages before taxes are calculated. But not every pre-tax deduction reduces every tax base. For example, a traditional 401(k) contribution generally reduces federal income-tax wages but not Social Security or Medicare wages.
Some qualifying health-benefit deductions can reduce all three. That’s why you may see different wage numbers on the same pay stub.
FICA is really two taxes
For most employees:
- Social Security: 6.2% up to the annual wage base
- Medicare: 1.45% with no annual wage cap
For 2026, the Social Security wage base is $184,500.
Additional Medicare Tax withholding can also apply above the federal threshold used for payroll withholding.
Those figures change, so check the current year rather than memorizing an old screenshot.
Federal withholding isn’t your final tax bill
Your employer withholds based on your wages, payroll schedule, IRS methods, and Form W-4. That’s not the same thing as your final tax liability. The difference gets reconciled when you file your return.
A big refund isn’t necessarily a prize. It may simply mean too much was withheld during the year.
A real example
Gross pay: $2,500. Traditional 401(k): $125. Qualifying pre-tax health premium: $150.
Federal taxable wages may drop to $2,225. Social Security and Medicare wages may be $2,375 because the 401(k) generally doesn’t reduce those wage bases.
At 7.65%, FICA on $2,375 is about $181.69. Then federal and state withholding come out. Then any post-tax deductions.
Then, finally, net pay. Now the smaller deposit makes a little more sense.
When should you look closely?
After:
- a raise
- a bonus
- a job change
- a benefits change
- a marriage or divorce
- a new dependent
- adding a second job
Some life changes affect withholding only after you update Form W-4.
Your payroll system isn’t reading your mind.
The two numbers worth comparing first
Gross pay. Net pay. If either looks wrong, start there before decoding every abbreviation. And if the bank deposit doesn’t match the net-pay line, that’s a payroll question worth asking immediately.
Related Reading
How to Build a Budget You’ll Actually Stick To
What Does an HSA Cover? Eligible Expenses and 2026 Rules
Sources & Last Updated
Last updated: August 2026. General educational information only; not personalized financial, tax, or legal advice.