Every paycheck tells a four-line story: what you earned, what came out before taxes, what was withheld for taxes, and what was taken out after taxes. Understanding those lines turns confusion into clarity—and makes your budget far more accurate.

The four lines at a glance

  1. Gross pay — Your earnings for the period: hours × rate, salary for the period, overtime, or commissions/bonuses.
  2. Pre-tax deductions — Things taken out before income tax is computed (for example: traditional 401(k)/403(b)/457 deferrals, Section 125 cafeteria-plan items like health premiums and FSAs, and payroll HSA contributions). These lower your taxable wages for federal income tax and often state/local taxes—and many cafeteria-plan items also reduce FICA wages. (IRS Pub. 969, IRS Pub. 15-B)
  3. Taxes & withholdings — Federal income tax (based on your W-4), state/local income tax (if applicable), and FICA: Social Security and Medicare. Current FICA employee rates are Social Security 6.2% (up to the SSA wage base) and Medicare 1.45% on all wages, with an extra 0.9% Additional Medicare Tax on high earners. (IRS Topic 751, Additional Medicare Tax, SSA wage base)
  4. Post-tax deductions — Items taken out after taxes are calculated, such as designated Roth 401(k) contributions, some insurance premiums, union dues, charitable deductions through payroll, or court-ordered garnishments. (IRS: Designated Roth account, DOL garnishment fact sheet)
Quick nuance: Traditional 401(k) contributions are pre-tax for income tax but still count in Social Security/Medicare wages (FICA). Cafeteria-plan health premiums and FSAs generally reduce FICA wages. (IRS FAQ, IRS Pub. 15-B)

A simple example

Suppose your gross for the period is $2,000. You defer $100 to a traditional 401(k) (pre-tax), your taxes/withholdings total $360, and you have $40 of post-tax deductions. Your net (take-home) pay is $1,500—the number you’ll actually budget with.

LineAmount
Gross pay$2,000.00
Less: Pre-tax deductions (401(k))($100.00)
Taxable wages (for income tax)$1,900.00
Less: Taxes & withholdings (federal/state/FICA)($360.00)
Less: Post-tax deductions($40.00)
Net (take-home) pay$1,500.00

Illustrative math only—not tax advice. Actual amounts vary by state/local rules, W-4 entries, benefit elections, and employer plan design.

Line-by-line: what to look for

1) Gross pay

Check the pay period dates, hours, overtime, and any supplemental pay (bonuses/commissions). If something looks off, compare to your time records or offer letter. A quick refresher on reading pay stubs: the CFPB’s one-page guide is excellent. (CFPB “How to read a pay stub”)

2) Pre-tax deductions

  • Traditional 401(k)/403(b)/457 deferrals: lower your federal taxable wages now; withdrawals in retirement are taxed. (IRS Topic 424)
  • Health accounts & benefits via cafeteria plan: FSAs and many employer health premiums are elected pre-tax; payroll HSA contributions may also be pre-tax when done through the plan. (IRS Pub. 969, IRS Pub. 15-B)

3) Taxes & withholdings (the FICA + income-tax bucket)

  • Federal income tax: driven by your W-4. You can preview the impact of changes with the IRS Tax Withholding Estimator.
  • Social Security & Medicare (FICA): generally 6.2% Social Security (up to the annual wage base set by SSA) and 1.45% Medicare on all wages; high earners also pay a 0.9% Additional Medicare Tax. (IRS Topic 751, SSA wage base, IRS Topic 560)
  • State & local income tax: varies by where you live and work. (Your state revenue agency provides details.)

4) Post-tax deductions

  • Designated Roth 401(k) deferrals: taken after tax; qualified withdrawals in retirement are tax-free. (IRS: Designated Roth account)
  • Insurance, union dues, charitable, or other elected deductions: appear after taxes unless your employer offers them pre-tax under a cafeteria plan.
  • Garnishments: court-ordered deductions follow federal limits. (DOL Fact Sheet #30)

How to verify your numbers

  • Use the IRS Tax Withholding Estimator to see how W-4 changes affect take-home pay.
  • Confirm whether specific benefits are pre-tax (and whether they reduce FICA) by checking your benefits summary or HR portal; IRS Publication 15-B explains cafeteria-plan treatment.
  • If your FICA line looks unusual, compare your year-to-date Social Security wages against the SSA wage base posted each year. (SSA: Contribution & Benefit Base)
Budgeting tip: Even if retirement savings are deducted pre-tax, track them in your savings overview so your plan reflects all your progress, not just cash flow.

Paycheck → budget checklist

  • Base your monthly plan on net pay (what actually hits your account).
  • Still record pre-tax savings (401(k), HSA, FSA) in your totals so your savings rate is accurate.
  • Review your stub’s YTD columns monthly; spot drift early (tax changes, benefit changes).
  • Revisit your W-4 after life changes (marriage, new dependents, second job, side income).

Further reading (official resources)