Payday is a universal delight. When that day finally arrives, we’re rewarded for our hard work, and we are reminded that our job serves a valuable purpose. Plus, we can pay off some financial burdens, treat ourselves, or just put the money into savings. It doesn’t matter how we spend our money, the point is that we like it.

On paydays, you don’t just receive a check to cash at the bank. You are also given a pay stub, which is a summary of your income for the entire year up to the current date. There are several things listed on a pay stub, which can make things confusing.

The following explanations will help you understand exactly what your paycheck means.

Pay Statement

First are the basics, such as your name, the pay date along with the entire pay period dates, and the check number. It will also give you your net pay, which is the total amount of money you earned after taxes and any applicable deductions for the current pay period. The statement will usually list your filing status (single, married, divorced, etc.), as well as the number of dependents you have.


Next, it will describe your earnings for the current pay period and for the entire year. This includes a breakdown of your hours worked, such as regular, overtime, unpaid, etc., for the current pay period.

It will also give you your current (or gross pay) amount, which is the amount of pre-tax money that you have earned for the current pay period. Next is the year-to-date (YTD) amount, which is your total pre-tax money thus far in the calendar year.


After the more basic information, there is a description of your income taxes. The majority of people employed in the U.S. are subject to pay Federal Insurance Contributions Act (FICA) taxes. In addition to federal personal income tax, most employees are also subject to state and local taxes.

Federal Personal Income Tax

Each year, the Internal Revenue Service (IRS) publishes income brackets with tax rates for individuals.

The brackets are divided up into four different filing categories (single, head of household, married filing jointly or qualified widow(er), or married filing separately) and seven different income ranges.

For a full explanation, click here.

FICA Taxes

There are two parts of FICA taxes, which total 15.3% combined. Employees and employers will split the costs and pay 7.65% each. However, self-employed persons are required to pay the full 15.3% on their earnings.

  • Social Security (Old Age, Survivor, and Disability Insurance, or OASDI)
    • The first part of FICA, which accounts for 12.4% of FICA taxes, costs the employer and employee 6.2% each, or the full 12.4% if you are self-employed.
  • Medicare
    • The second part of FICA, which accounts for the remaining 2.9% of FICA taxes, costs the employer and employee 1.45% each, or the full 2.9% if you are self-employed.
    • Federal government workers hired prior to 1984 pay medicare, but not social security tax, and some on-campus college students are exempt from FICA tax payments.

State Taxes

These taxes vary by state, but are generally used for education, health care, transportation, and more.

  • Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
    • New Hampshire and Tennessee do not have tax on income, but they do have tax on earnings from interest and dividends.
  • Eight states have flat rates for individual income tax: Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah.
  • The rest of the U.S. has a range of brackets.
    • Iowa has the lowest tax bracket at 0.36%.
    • Oklahoma has the lowest tax bracket average at 2.96%.
    • Oregon has both the highest tax bracket at 9.9%, as well as the highest tax bracket average at 7.73%.

For more information about your state income taxes, please click here.

Local Taxes

Again, these taxes vary by state and beyond that, they are imposed by local authorities, such as counties or municipalities.

  • Most local taxes are low, usually ranging somewhere between 1% and 3%.
  • These taxes can be used for any number of civic duties, such as water and sewer treatment or environmental maintenance.

Direct Deposit

Physical paychecks are becoming a thing of the past and being replaced with electronic direct deposits. If you have direct depositing, your pay stub acts as the notification that your money is now in your account.

The final information on your pay stub will be a verification of your direct deposit, which includes the type of account, checking or savings, as well as the amount being deposited.

What questions do you have about your pay stub? Ask us! We’d love to help.