How to Read Your Paycheck: A Complete Guide to Every Line, Code, and Deduction

If you want to understand your money, the most important document you’ll ever learn to read is your paycheck. Not your tax return. Not your bank statement. Your paycheck.

Every line on your paystub is a clue — how much you’re really earning, what benefits are costing you, how much tax you’re paying, and whether your withholding is correct.

The problem is that most paychecks look like they were designed by someone who never wanted you to understand them. Codes, columns, abbreviations, deductions — it’s a lot.

This guide fixes that. We’ll translate every major line in simple English and show you exactly what it means for your money.

Meet Jordan: “I thought I was getting cheated… turns out I just didn’t understand my stub.”

Jordan had been working full-time for years. Every time he got his paycheck, he felt confused:

• “Why is my take-home so low?”
• “Why are they taking so much in taxes?”
• “What is FICA?”

One day he compared his paystub to his friend’s and thought he was being underpaid. After digging deeper, he realized the issue wasn’t his employer — it was that he never learned how to read the document that controlled his financial life.

The three sections every paycheck has

Almost every paystub in America has these core sections:

• Gross pay (what you earned before deductions)
• Taxes withheld (federal, state, local)
• Deductions (benefits, retirement, insurance)
• Net pay (what actually hits your bank)

Let’s break each one down.

1. Gross Pay (Your Starting Point)

Gross pay is the total amount you earned before anything is taken out.

You might see it listed as:

• REG PAY or REGULAR
• HOURS × RATE
• SALARY for salaried workers
• OT for overtime
• SHIFT DIFF for shift differentials

This number is not what you take home — it’s just the starting point.

Overtime

Overtime is typically 1.5× your hourly rate. If you’re salaried, it depends on your classification.

Bonuses

Bonuses might appear as:

• BON
• SUPP PAY
• Award

Bonuses are often taxed differently (higher withholding upfront), even though your final tax for the year evens out.

2. Federal Taxes (The Biggest Chunk)

Federal withholding appears as:

• FED TAX
• FIT (Federal Income Tax)

This is the tax your employer withholds based on the W-4 form you filled out. If your withholding is wrong, your refund will be too.

How federal tax is calculated

It depends on:

• Your income
• Your filing status
• The dependents you claimed
• Any extra withholding you requested

3. Social Security Tax (FICA SS)

You’ll see it listed as:

• FICA SS
• OASDI
• Social Security

This is a flat percentage of your income up to a certain limit. Everyone pays it unless exempt for rare reasons.

4. Medicare Tax (FICA MED)

You’ll see:

• FICA MED
• Medicare

Medicare has no income cap — high earners pay more.

5. State Income Tax

If your state has income tax, it appears as:

• STATE TAX
• SIT

Your state withholding is based on your state W-4 or equivalent form.

6. Local Taxes

Some cities and counties charge local tax. You’ll see:

• LOC TAX
• Municipal Tax

These depend on where you work and sometimes where you live.

7. Pre-Tax Deductions (This Saves You Money)

Pre-tax deductions lower your taxable income. These are the benefits you pay for before tax is calculated.

Common pre-tax deductions:

• Health insurance premiums
• Dental insurance
• Vision insurance
• HSA contributions
• FSA contributions
• 401(k) contributions (traditional)

8. Post-Tax Deductions

These do not reduce your taxable income. They come out after taxes.

Examples include:

• Roth retirement contributions
• Union dues
• Wage garnishments
• Life insurance (depending on employer)

9. Employer Contributions (Money You Don’t Pay For!)

Many paychecks list what your employer pays on your behalf.

You might see:

• ER 401k (employer match)
• ER HSA (employer HSA contribution)
• ER INS (employer insurance help)

These don’t reduce your paycheck — they’re just benefits you receive.

10. Net Pay (What Actually Hits Your Bank)

This is the number everyone cares about: the amount you take home.

Net pay is calculated as:

Gross Pay − Taxes − Deductions = Net Pay

Why your net pay goes up or down:

• You changed your W-4
• Your insurance plan changed
• You got a raise or bonus
• Your city/state changed
• You added dependents
• Your employer updated payroll

Decoding Common Paycheck Codes

Employers often use abbreviations. Here’s what the most common ones mean:

• FIT – Federal Income Tax
• SIT – State Income Tax
• FICA – Social Security + Medicare
• REG – Regular pay
• OT – Overtime
• SUPP – Supplemental wages
• HSA – Health Savings Account
• FSA – Flexible Spending Account
• 401K – Traditional retirement contributions
• ROTH – Roth retirement

Jordan’s Ending: “Now my paycheck makes sense — and so do my taxes.”

Once Jordan learned how to decode his paystub, everything clicked:

• He understood why his refund looked the way it did
• He fixed his withholding so he wouldn’t owe again
• He increased his pre-tax contributions to save money
• He spotted benefits he wasn’t using and simplified his deductions

His paycheck became a tool instead of a mystery — and his tax life got instantly easier.

The bottom line: If you can read your paycheck, you can control your money

• Your taxes start with your paystub
• Your refund depends on your withholding
• Your savings come from deductions you choose
• Your benefits affect your tax bill
• Your take-home pay is the final result of every decision

Once you understand the lines, the codes, and the flow, your paycheck stops being a confusing document — it becomes a map of your financial life.