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Paycheck 101: What does everything on your paycheck mean?

Paycheck 101: What does everything on your paycheck mean?

Your paycheck contains a lot of information and some of it is confusing. Have you ever looked at a paycheck and wondered, what is FICA and why is it keeping so much of my money? Here is a brief overview of what each area of the typical paycheck represents to help you know where your money is going.

Gross pay

Gross pay is the amount of money you agreed to be paid on an hourly or annual salary basis, including overtime and other forms of pay. This is what you would receive before any deductions – if nothing was taken out of your paycheck.

Net pay

Net pay is the amount you take home after deductions are made.

Deduction

A deduction is any amount that is taken out of a paycheck for federal, state and/or local taxes and employee benefits. Some deductions are taken out before taxes (e.g., medical insurance, 401k contributions) and some are taken out after taxes (e.g., garnishments, supplemental life insurance).

Federal income tax (FIT) withholding

FIT is the amount required by law for employers to withhold from wages to pay taxes. This amount is based on information provided on the employee’s W-4.

FICA

FICA stands for Federal Insurance Contribution Act. This tax includes two separate taxes for employees: Social Security and Medicare. These two taxes may be combined as one or listed separately on a paycheck stub.

Looking for more resources on understanding your paycheck? Check out more articles on our blog.

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This blog is for informational and educational purposes only. It does not constitute legal advice, and cannot constitute legal advice, because the authors are not licensed attorneys. Readers should not rely or act upon any information presented on this blog without seeking professional legal counsel. The views expressed in each post are those of the author, and the author alone; they are not the views of Ahola. The information provided in this blog is general, and based on information available as of the date of publishing. Information herein is provided on an “as is” or “as available” basis; we make no warranty of any kind to you regarding the information provided and disclaim any liability for damages from use of the blog or its content. Please consult an attorney to obtain advice with respect to any particular question or issue.