Money basics

How to Read a Pay Stub Line by Line

Gross pay, federal withholding, Social Security, Medicare, and the pre-tax versus post-tax distinction, worked through one real biweekly paycheck.

By the Euphoria team · 2026-07-24 · 9 min read

Three numbers, and only one of them was promised to you

A pay stub has a number at the top and a number at the bottom, and the gap between them is where most people stop reading. That gap is not a single tax. On a typical stub it is five or six separate lines, computed in a specific order, and the order changes the total.

Here is the part that is genuinely counterintuitive. Two people with the same gross pay, the same filing status and the same total deductions can take home different amounts, purely because of which lines sit above which. This article takes one stub apart line by line so you can see why.

Our worker earns $20 an hour and is paid every two weeks. In this period they logged 80 regular hours and 5 hours of overtime.

• $184,500 the 2026 wage cap on Social Security tax, with no cap at all on Medicare
• 7.65% the combined employee rate for Social Security and Medicare
• $50 what one wrong overtime rate costs this worker per paycheck

Gross pay, and how overtime is built

Gross pay is everything earned before anything is removed. For an hourly worker it is hours times rate, with overtime priced separately.

Regular pay is 80 hours at $20, which is $1,600. Under the Fair Labor Standards Act, hours worked over 40 in a workweek must be paid at no less than time and one half of the regular rate, so those 5 overtime hours are priced at $30 each, which is $150. Gross pay is $1,750.

Two details hide in that paragraph. Overtime is counted per workweek, not per pay period, so 50 hours one week and 30 the next produces 10 overtime hours even though the two-week total is a flat 80. And the multiplier applies to the regular rate, which is not always the same as the posted hourly rate, because certain non-discretionary bonuses have to be folded into it first.

Salaried stubs show the same idea with the hours column replaced by a period fraction: an annual figure divided by 26 for biweekly pay, or by 24 for twice a month. Those two schedules are not interchangeable. Biweekly means 26 paychecks, and twice a month means 24, so the same salary produces different per-period gross pay.

Federal withholding is an estimate, not a calculation

The first deduction most stubs list is federal income tax. This line is the least precise thing on the page, and understanding why explains a lot of April surprises.

Your employer does not know your tax bill. They know one job's wages and whatever you wrote on your Form W-4. So they run a projection: take this period's taxable wages, annualize them, apply the tables in Publication 15-T, and withhold one period's share of the result.

Follow that through for our worker. Their taxable wages for federal income tax come to $1,602.50 this period, once the pre-tax items below come off. Annualized that is $41,665. Subtract the 2026 standard deduction of $16,100 and taxable income is $25,565. At 10 percent on the first $12,400 and 12 percent on the remaining $13,165, the year's tax is $2,819.80, and one twenty sixth of that is about $108.

The real stub figure will be close to that but not identical, because the tables round into brackets rather than computing to the cent. The important property is that withholding is a forecast of a year you have not finished living. Pick up a second job, work a stretch of heavy overtime, or quit in June, and the forecast was built on an assumption that stopped being true.

Social Security and Medicare are not estimates

The next two lines behave completely differently. They are fixed percentages with no guessing involved.

The employee rates are 6.2 percent for Social Security and 1.45 percent for Medicare. The two together are usually labeled FICA, and they total 7.65 percent. Your employer pays the same amounts again on top, which never appears on your stub.

The difference between the two lines is the cap. Social Security applies only up to an annual wage ceiling, which the Social Security Administration set at $184,500 for 2026. Above that, the Social Security line stops. The most anyone pays into it in 2026 is 6.2 percent of $184,500, which is $11,439. Medicare has no ceiling whatsoever, and an extra 0.9 percent is withheld on wages above $200,000 in a year regardless of filing status.

For our worker, Social Security and Medicare are charged on $1,690 rather than the full $1,750, for a reason covered in the next section. That works out to $104.78 and $24.51.

Federal withholding is a guess about your year. Social Security and Medicare are arithmetic about your paycheck.

State and local, where geography decides

Below the federal lines sit state income tax and, in some cities and counties, a local one. This is the most variable part of any stub. Several states levy no income tax on wages at all, most use brackets of their own, and a handful apply a single flat rate. Some states pile on separate lines for disability or paid family leave insurance.

The rule that catches people is that these are generally owed where you work, not only where you live, and the two can disagree. If you commute across a state line or work remotely from a different state than your employer's office, the withholding on your stub may be wrong in both directions until somebody fixes your records.

Pre-tax and post-tax, the distinction that does the real work

Now the part that explains why identical gross pay produces different take-home pay.

A pre-tax deduction comes out of your pay before tax is computed, so it shrinks the wages that tax is charged on. A post-tax deduction comes out after, so it shrinks your take-home pay and nothing else.

Our worker elects three things: 5 percent of gross into a traditional retirement plan, which is $87.50, a health insurance premium of $60, and a $25 contribution to a Roth account. The first two are pre-tax. The third is post-tax.

Here is the subtlety almost every explanation skips. Pre-tax does not mean exempt from everything. A health premium run through a workplace cafeteria plan escapes income tax and payroll tax. A traditional retirement deferral escapes income tax but is still charged Social Security and Medicare. That is why the FICA lines above were computed on $1,690, which is $1,750 minus the $60 health premium, while the income tax line was computed on $1,602.50, which is $1,750 minus both pre-tax items.

So the same $100 moved through three different lines costs your take-home pay three different amounts.

Net pay is what survives all of it: $1,750 minus $147.50 of pre-tax deductions, minus about $108 of federal withholding, minus $129.29 of Social Security and Medicare, minus the $25 post-tax contribution, which leaves roughly $1,340.

Both bars in that chart are the same $1,750 of gross pay. Electing deductions moved money out of take-home, and it also shrank both tax lines on the way.

The year-to-date column is where the rules live

Most stubs print a second column of numbers beside the current ones, running totals for the year so far. Those are easy to skim past, and they are the most useful figures on the page.

They matter because several tax rules are annual tests, not per-paycheck ones. The $184,500 Social Security ceiling is measured on year-to-date wages, so a high earner watches that line simply stop partway through the year. The $200,000 Additional Medicare threshold works the same way. Your employer decides what to withhold from your next paycheck by reading the year-to-date figures on your last one.

They are also your only running audit. The year-to-date gross on your final stub of the year should reconcile against the W-2 you are handed in January, and the year-to-date retirement figure is the only convenient way to know whether you are on pace to hit your annual contribution limit or blow past it. Checking one number in September is far cheaper than discovering a payroll error after the year has closed.

Two errors worth catching

Most payroll mistakes are small and self-correcting. Two are not.

• The wrong filing status. Withholding tables are keyed to filing status, and the married filing jointly table assumes a $32,200 standard deduction where the single table assumes $16,100, with wider low brackets to match. A single person coded as married has too little withheld from every single paycheck. For our worker, the gap is roughly $2,000 across a year, and none of it is forgiven. It arrives as a bill in April.
• The wrong hours or overtime rate. This one is worth checking because it is silent. If those 5 overtime hours were paid at $20 instead of $30, the stub would look ordinary and be $50 light. Across 26 pay periods that is $1,300 of pay you earned and were not given. Compare the hours on the stub against your own record, then check that the overtime line is priced at one and a half times the regular rate rather than at it.

What to do with this

A pay stub is the only document that shows you the full price of employment from your side of the transaction. Read it once with the arithmetic in front of you and the numbers stop being a wall of abbreviations: a promise at the top, an estimate, two fixed percentages, a set of elections you made, and whatever is left.

If you want to practice before your next payday, Euphoria's budgeting lessons let you rebuild a stub from gross pay upward, changing the deduction lines and watching net pay move, so the first time you check a real one you already know what the numbers should look like.