Pay Stub Deductions Explained: What Every Line Means

Why Do You Have So Many Deductions?

Your pay stub may show a dozen or more deduction lines between gross pay and net pay. Each one represents money going to a specific place: the federal government, your state, Medicare, your future retirement, your health insurance, and more. Here is exactly what each means.

Mandatory Tax Deductions (Required by Law)

Federal Income Tax (FIT)

The largest deduction for most workers. The amount depends on your W-4 filing status (Single, Married, Head of Household), any extra withholding you requested, and your earnings. This money goes to the federal government. You reconcile it every April when you file your 1040 — if too much was withheld, you get a refund.

Social Security (OASDI)

Rate: 6.2% of gross wages up to the annual Social Security wage base ($176,100 in 2026). Once your YTD wages exceed this cap, Social Security withholding stops for the rest of the year. This funds Social Security retirement and disability benefits.

Medicare (HI)

Rate: 1.45% of all wages — no cap. Earners above $200,000 (single) or $250,000 (married filing jointly) pay an additional 0.9% Additional Medicare Tax. This funds Medicare health coverage for people 65+ and those with disabilities.

State Income Tax (SIT)

Varies dramatically by state. California tops out at 13.3%. Texas, Florida, Nevada, and 6 other states have zero state income tax. The amount depends on your state withholding form and exemptions claimed.

State-Specific Mandatory Deductions

• CA SDI — California State Disability Insurance (0.9% in 2026). Funds short-term disability and paid family leave.
• NY SDI/PFL — New York disability and paid family leave contributions
• NJ FLI / SUI — New Jersey family leave insurance and state unemployment
• HI TDI — Hawaii temporary disability insurance
• WA Cares / WA FML — Washington long-term care and family leave

Local Income Tax

Cities including New York City, Philadelphia, Detroit, Columbus, and Pittsburgh levy their own local income tax. If you see a "City Tax" or "Local Tax" line, this is it.

Pre-Tax Benefit Deductions (Voluntary, Reduce Taxable Income)

401(k) / 403(b) Contributions

Your retirement contribution reduces your federal and state taxable income (but not FICA). The 2026 contribution limit is $23,000 ($30,500 if 50+). Every dollar here goes directly to your retirement account and lowers your current tax bill.

Health Insurance Premium

Your share of employer-sponsored health insurance. Under a Section 125 cafeteria plan, this is pre-tax — saving you federal income tax, state tax, and FICA on the amount. A $300/month premium in the 22% federal bracket saves approximately $83/month in taxes.

HSA Contribution

Health Savings Account contributions are triple-tax-advantaged: pre-tax going in, tax-free growth, tax-free withdrawals for medical expenses. The 2026 limit is $4,300 (individual) or $8,550 (family).

FSA Contribution

Flexible Spending Account — pre-tax, but use-it-or-lose-it within the plan year. Limit is $3,300 in 2026.

Dental and Vision Insurance

Usually pre-tax under Section 125. Often a small deduction ($5-30 biweekly) but meaningful over a year.

Commuter Benefits

Pre-tax transit and parking benefits up to $325/month each in 2026.

Post-Tax Deductions (Come Out After Taxes)

Roth 401(k)

Unlike traditional 401(k), Roth contributions are post-tax — you pay tax now, withdrawals in retirement are tax-free. Same contribution limits as traditional 401(k).

Life Insurance Above $50,000

Employer-paid group life insurance above $50,000 is imputed income — the IRS treats it as taxable compensation. You will see a small addition and then deduction to account for this.

Wage Garnishments

Court-ordered deductions for child support, alimony, tax levies, student loan defaults, or consumer debt. If you see an unfamiliar post-tax deduction, this may be the cause.

Union Dues

If you belong to a union, dues are deducted post-tax (though they may be deductible on Schedule A if you itemize).

Verify Your Deductions Are Correct

Compare your current pay stub deductions against your last pay stub. Changes should only happen if you changed your W-4, enrolled in new benefits, or received a raise. Unexpected changes are worth investigating with HR.

Extract Pay Stub Data Automatically

Processing pay stubs for income verification, mortgage underwriting, or benefits audits? Pay Stub Parser extracts all deduction lines automatically from PDF pay stubs — every tax withholding, every benefit deduction, gross and net pay, YTD totals. Structured output in seconds.