How to Read Your Paycheck: From Gross Pay to Take-Home

The five blocks of a pay stub

Every US pay stub, whatever the payroll provider, is the same document wearing different formatting. It has five blocks:

1. Earnings: hours, rate, salary for the period — and a year-to-date (YTD) column that matters more than the period column.
2. Pre-tax deductions: 401(k) contributions, health-insurance premiums, HSA/FSA amounts. These leave before income tax is calculated, which lowers the tax — one reason two people on the same salary can have different withholding.
3. Taxes: federal income tax, Social Security, Medicare, and state (sometimes city) income tax. This guide is about this block.
4. Post-tax deductions: Roth 401(k), garnishments, union dues, after-tax benefits. These do not change your taxes.
5. Net pay: what actually lands in your account — gross minus everything above.

Two habits make stubs easy to audit. First, always read the YTD column: errors compound quietly there. Second, remember the stub shows withholding — an estimate your employer sends the IRS — not the final tax itself. The difference is settled when you file, which is what a refund (you over-withheld) or a balance due (you under-withheld) really is.

Gross pay: salary ÷ paychecks is only the start

The example throughout this guide: a single filer earning an $85,000 salary, no pre-tax deductions, paid biweekly — the defaults of the site's paycheck calculator, so you can reproduce every line. Your pay frequency sets the size of each check but not the annual totals:

Biweekly pay contains a trap for budgeters: 26 checks is two more than "twice a month × 12", so two months a year contain a third check. Mortgage and rent are monthly; a budget built on two biweekly checks a month quietly generates two "extra" checks a year — plan where they go before they evaporate.

Federal income tax: brackets are slices, not a rate on everything

Federal tax is calculated on taxable income — gross pay minus the standard deduction, which for tax year 2026 is $16,100 for a single filer ($32,200 married filing jointly). Our example: $85,000 − $16,100 = $68,900 of taxable income. That amount is then taxed in slices through the 2026 single-filer brackets:

The brackets continue at 24% (to $201,775 of taxable income), 32%, 35% and 37% above $640,600, but our example never reaches them — and that is the point most often misunderstood. This earner is "in the 22% bracket", yet pays $9,870 on $85,000 of gross pay: an effective federal rate of 11.6%. The 22% applies only to the top slice. A raise that pushes $1,000 into the 24% bracket costs $240 of tax on that $1,000 — it can never reduce your take-home overall, a myth that survives because marginal and effective rates are so easily confused.

FICA: the two flat taxes

Under the federal line sit two payroll taxes, together called FICA, and unlike income tax they are flat percentages of gross wages with almost no deductions:

• Social Security: 6.2% of wages, but only up to a wage base that rises with inflation — $184,500 for 2026. On $85,000 that is $5,270.00 a year; the most anyone pays in 2026 is $11,439.00, and if your YTD Social Security line keeps growing past that, something is wrong.
• Medicare: 1.45% of all wages, no cap — $1,232.50 on $85,000. Above $200,000 of wages from one employer, an additional 0.9% Medicare tax is withheld (your employer must start it at that threshold regardless of your filing status; the final liability is settled on your return).

Your employer pays a matching share of both taxes that never appears as a deduction on your stub — it is a cost of employing you, not a cost taken from you. What you see, 7.65% combined on most wages, is exactly your half. Self-employed workers pay both halves (15.3%) as self-employment tax, which is why the same income feels noticeably more taxed without an employer.

The state layer: same salary, different stub

Everything so far is identical in all 50 states. The state layer is not. Nine states levy no income tax on wages at all; the rest run everything from a low flat tax to nine-bracket systems, some with their own payroll programmes (paid-leave insurance, disability) riding on the stub. Hold the example constant and move it from Texas (no state income tax) to California:

Same job, same salary, same federal government — a $4,620.86-a-year difference in take-home, purely from the state layer ($3,515.86 of California income tax plus $1,105.00 of disability insurance). This is why remote-work offers quote total compensation but your life runs on the stub: run the paycheck calculator for your state before comparing offers across state lines. Every state page on BeadCalc uses that state's published 2026 tables and names its source.

Withholding is an estimate — and you control it

Look again at the federal line: $379.62 per check is not "the tax" — it is the annual estimate ($9,870) divided by 26, based on the W-4 form you gave your employer. The IRS settles the difference when you file: over-withhold and you get a refund (an interest-free loan you gave the government); under-withhold and you pay the balance, possibly with a penalty. Big life changes — marriage, a second job, a spouse starting work, a child — all change the right W-4 answer, and none of them update it automatically. A stub that suddenly changes size in January usually reflects new-year tax tables or a benefits change, not an error; a stub whose YTD columns do not add up across the year is worth a question to payroll.

A two-minute audit of your own stub

1. Rate × hours (or salary ÷ periods) equals the gross line? If not, everything downstream is wrong too.
2. YTD Social Security stops growing once YTD wages pass $184,500 (2026)? If it does not, payroll is over-withholding FICA.
3. Federal YTD ÷ your paychecks so far ≈ a sensible annual tax for your income and filing status? The income tax calculator gives the target number.
4. The state line matches the state you actually work in — remote workers are most often bitten here, especially after a move.
5. Pre-tax deductions you elected (401(k) percentage, health premium) match what you signed up for, to the dollar.

A paycheck is not a mystery document; it is five blocks of arithmetic, and now you have the keys to all of them. When the numbers feed a bigger decision — like how much house the take-home pay can really carry — our guide to how much house you can afford picks up exactly where the stub leaves off.