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How To Understand Your Pay Stubs

Many people prefer to receive their paycheck directly into their bank account. Those who receive a paycheck regularly from their employer should be should understand all the information included therein. This is important information because it ensures that, not only are you receiving the correct amount of money that you’re entitled to but also that you’re paying the correct amount of taxes.

As being paid by direct deposit has become more and more popular, receiving an actual physical paycheck has declined. Read on to make sure you understand the major terms and figures on your paystub. 

What You Get Paid

This is fairly self-explanatory but is worth a mention nonetheless. Your pay on your pay stub amounts to how much you are being paid in this particular period, where it be a week, month, or year. This is the easiest figure to understand on your paystub. What you’ll see here will depend on whether you’re an hourly or salaried worker.

If you work by the hour, then you’ll see the number of hours you’ve worked and your rate per hour. You’ll also see any overtime hours if there are any. If you earn an annual salary, then you’ll see your payment for the period plus any bonuses if there are any.  

What appears here will usually be along the lines of the following:

  • Gross earnings – This refers to the amount of money you are paid before any deductions or taxes are taken. 
  • YTD – This stands for ‘year to date,’ and refers to the amount of pay you’ve received since the start of the year to the current date. 
  • Net Pay – This is the most important figure for most people. It’s the actual amount that you get paid.

If you’re not sure how to get pay stubs, follow the link.


Another section on your paycheck refers to the amount of taxes you have paid. This can be the most confusing part of your paycheck due to the variety of different taxes people have to pay. The amount of taxes you pay depends largely on where you live, how much you earn, and whether you have any dependents.

Different states have different tax regulations, so if where you get paid is different from your residence, this may affect your taxes. The main types of taxes that will appear on your paystub will be the following:

Photo by Amol Tyagi on Unsplash 

Federal Income Tax

Federal income tax is the federal government withholding a certain amount of the income you make each year. Your employer reports your yearly income as well as the number of dependents on a W-4 form to the federal government. The Internal Revenue Service (IRS) then divides this number by the number of paychecks you receive a year (usually 12, 24, or 26) and deducts this from each paycheck. 

State and Local Taxes (SALT)

Some states don’t have taxes on income (Florida and Texas) The amount you owe is calculated in much the same way as the federal income tax is.


Federal Insurance Contributions Act mandates that every taxpayer in the United States must pay into two programs; social security and medicare. If FICA appears on your paystub, then this is the amount you’re contributing to these programs. Some stubs will break down your contributions into these two funds separately and others will not.

The Bottom Line

Now that it has become more and more common to be paid by direct deposit, many people are finding themselves unfamiliar with paystubs and consequently are becoming confused with the amount of taxes they are paying and where exactly their taxes are going. Hopefully, this article has helped to shed some light on the matter. 

About the Author

Nicole Booz

Nicole Booz is the founder and Editor-in-Chief of GenTwenty, GenThirty, and The Capsule Collab. She has a Bachelor of Science in Psychology and is the author of The Kidult Handbook (Simon & Schuster May 2018). She currently lives in Pennsylvania with her husband and two sons. When she’s not reading or writing, she’s probably hiking, eating brunch, or planning her next great adventure.


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