Understanding Your Paystub

Deductions• Anything subtracted from the pay you earned• Types– Federal taxes– State taxes– Local taxes (county)– Social security (FICA)– Medicare (FICA)– Health benefit premiums– Savings/Retirement contributions– Union dues

Earnings

• Gross pay – total amount of money you earned during a pay period

• Taxable Income – Amount of money you earned that can be taxed– Your gross pay MINUS any tax-free (or “pre-tax”)

deductions• Savings/Retirement contributions• Health savings accounts

– Tax-free (pre-tax) deductions lower your taxable income

– How do tax-free deductions work?

Tax-Free (pre-tax) DeductionsWithout using tax-free deductions

Gross pay = $1,000Federal tax rate (10% of income) = $100Retirement contribution = $100You get paid = $800

Using tax-free deductions

Gross pay = $1,000Retirement contribution (pre-tax) = $100Taxable Income = $900Federal tax rate (10% of income) = $90You get paid = $810

Totals

• Net Pay – the amount of pay that is left after deductions are taken out of your gross pay– AKA: Take home pay

• Year-To-Date Totals: the total amount of earnings and deductions broken down by categories

Quick Review

1. The total amount of money you earned in a pay period is known as your ______________

2. Any money taken out of your gross pay is known as a _______________

3. The amount of your gross pay which can be taxed is known as your __________________

4. Taxes are a type of ________________5. The total amount of money you end up taking

home after deductions is known as your _______________

Gross pay

deduction

Taxable incomededuction

Net pay