How to Read a Pay Stub: Gross Pay, Net Pay, and Deductions

Your pay stub is the single most useful document for building a budget, because it contains the number every budget starts from: what you actually take home. But stubs are dense, abbreviated, and vary by employer. Here is what the standard sections mean.

Gross pay vs. net pay

Gross pay is what you earned before anything is taken out — your hourly rate times hours worked, or your salary divided across pay periods. Net pay (often labeled "net," "take-home," or "amount paid") is what actually lands in your account. The difference between the two is the deductions, and it is often substantial. A budget built on gross pay overstates what you have to work with; net pay is the number that matters for planning day to day.

Common deduction lines

Federal income tax withholding — an estimated prepayment of your annual income tax, based on the Form W-4 you filed with your employer. The IRS provides a free Tax Withholding Estimator to check whether the amount being withheld lines up with what you'll likely owe. We explain the mechanics in how tax withholding works.
FICA — Social Security and Medicare taxes, sometimes shown as separate "OASDI" and "Medicare" lines.
State and local taxes — present in most states, absent in a few.
Pre-tax benefit deductions — health insurance premiums, retirement plan contributions, HSA or FSA contributions. "Pre-tax" means they come out before income tax is calculated.
Post-tax deductions — things like Roth retirement contributions, union dues, or wage garnishments, taken out after taxes.

Year-to-date columns

Most stubs show two columns: the current pay period and YTD (year-to-date) totals. The YTD column is useful for spotting errors — if a deduction suddenly doubles or disappears, the running total makes it visible — and for estimating annual figures partway through the year.

Pay frequency and why it matters for budgeting

Employers commonly pay weekly, biweekly (every two weeks), semimonthly (twice a month), or monthly. Biweekly and semimonthly look similar but differ: biweekly produces 26 paychecks a year, which means two months each year contain a third paycheck. If your bills are monthly, knowing your frequency tells you how paychecks map onto due dates.

Using the stub in your budget

For budgeting purposes, the essential numbers are net pay per period and how many periods fall in a month. Everything else on the stub is context — worth understanding, and worth checking occasionally for errors, but not part of the monthly math. The FDIC's Money Smart financial education curriculum covers pay, banking, and budgeting basics in more depth, free of charge.

If reviewing your stub raises questions about whether your withholding is set appropriately for your situation, that is a decision question rather than a definition question — the IRS estimator and a tax professional are the right places to take it.