How to Read Your Payment Stub and Track Your Deductions
What a payment stub shows you
A payment stub is the document your employer gives you with each paycheck. It breaks down how much you earned, what came out of your paycheck, and what you actually take home. You get one whether you're paid weekly, biweekly, semimonthly, or monthly.
The stub is your proof of income and your record of where your money went. Banks ask for it when you apply for a loan. Landlords ask for it to verify you can pay rent. You need it to dispute errors on your paycheck or to track whether your employer withheld the right amount for taxes.
Most employers now deliver stubs electronically through a payroll portal or email. Some still print them. Either way, you should keep them for at least a year—they're your only record if a question comes up later about what you were paid or what was deducted.
Key Takeaways
- Your payment stub shows gross pay (what you earned before deductions), all deductions, and net pay (what you actually receive).
- Mandatory deductions include federal income tax withholding, Social Security tax (6.2%), and Medicare tax (1.45%); state and local taxes vary by location.
- Voluntary deductions might include health insurance premiums, retirement contributions, or wage garnishments ordered by a court.
- Year-to-date totals on your stub let you track cumulative earnings and taxes withheld, which you'll need when filing taxes or applying for loans.
- If your stub shows an error—wrong hours, missing deduction, or incorrect tax withholding—report it to your payroll department immediately.
The three sections of a payment stub
Every stub has the same basic layout. At the top is your personal information: your name, employee ID, pay period dates, and pay date. This tells you which paycheck this is and when you received it.
The middle section lists earnings and deductions. Earnings show your gross pay—the total before anything comes out. This might be broken into regular hours, overtime, bonuses, or other types of pay your employer offers. Below that are all the deductions: taxes, insurance, retirement savings, or anything else your employer withholds.
The bottom shows your net pay—the actual amount deposited into your bank account or printed on your check. Many stubs also show year-to-date totals for earnings, each type of tax, and total deductions. These running totals are crucial for tax time.
Mandatory deductions that come out of every paycheck
Federal income tax withholding is the largest deduction for most people. Your employer calculates this based on the W-4 form you filled out when you were hired. The amount depends on your income, filing status, and how many dependents you claim. If you claim too many dependents, too little gets withheld and you'll owe money at tax time. If you claim too few, too much gets withheld and you'll get a refund.
Social Security tax is always 6.2% of your gross pay, up to a wage cap that changes each year. Your employer also pays 6.2% on your behalf—that's not shown on your stub, but it's part of the total Social Security system funds. Medicare tax is always 1.45% of your gross pay with no wage cap, plus your employer pays another 1.45%. If you earn over a certain threshold (which varies by filing status), an additional 0.9% Medicare tax applies to you alone.
State and local income taxes vary by where you live and work. Some states have no income tax. Others withhold a percentage similar to federal tax. Some cities add their own local tax on top. Your stub will show whatever applies to your location.
Voluntary deductions and what they mean
Voluntary deductions are things you chose or agreed to. The most common is health insurance—your share of the premium comes out before taxes in most cases, which saves you money. If you have dependents on your plan, the cost is higher.
Retirement contributions like a 401(k) or 403(b) also come out before taxes, reducing your taxable income for the year. Your employer might match part of what you contribute—that match is not shown as a deduction because it's money the employer adds, not money taken from you.
Other voluntary deductions might include life insurance, disability insurance, flexible spending accounts (FSAs) for medical or dependent care expenses, or union dues. Some are pre-tax (they reduce your taxable income) and some are post-tax (they come out after taxes are calculated). Your payroll department or benefits guide will tell you which is which.
Wage garnishments are different—they're not voluntary. A court order or government agency (like the IRS or a child support enforcement office) can require your employer to withhold money from your paycheck. Garnishments appear as a separate line item and continue until the debt is paid or the order is lifted.
Year-to-date totals and why they matter
Most stubs show a "YTD" or "year-to-date" column next to each earnings and deduction line. This is a running total from January 1 through the current pay period. YTD earnings tell you how much you've made so far this year. YTD federal tax withholding tells you how much has been taken out for federal income tax.
These totals are essential when you file your tax return. The IRS expects your total federal withholding for the year to match what your employer reports on your W-2 form. If there's a gap, you might owe money or be owed a refund. YTD Social Security and Medicare taxes also appear on your W-2 and are used to calculate your future Social Security benefits.
When you apply for a loan, a landlord might ask for your most recent stub to see your YTD earnings. This shows them your actual income for the year so far, not just one paycheck. If you've had time off or taken unpaid leave, YTD earnings will be lower than if you'd worked every week.
Common errors on payment stubs and how to fix them
The most frequent error is wrong hours. If you worked 40 hours but the stub shows 38, or if overtime wasn't calculated correctly, your gross pay will be wrong. Check the hours against your own records or your employer's time-tracking system. Report any mismatch to payroll immediately—they can issue a corrected stub and adjust your next paycheck.
Tax withholding errors happen when your W-4 information is outdated or entered incorrectly. If you got married, had a child, or changed jobs mid-year, your withholding might be off. You can submit a new W-4 to your employer at any time, and the change takes effect on the next paycheck.
Missing deductions or deductions that shouldn't be there are also common. If you enrolled in health insurance but it's not showing up, or if a deduction for a benefit you cancelled is still appearing, contact payroll. These errors usually get caught quickly, but you have to report them.
If you spot an error, don't wait. The longer it goes unnoticed, the harder it is to fix retroactively. Keep copies of your stubs so you can compare them month to month and catch patterns—like if your federal withholding suddenly jumped or a deduction disappeared.
Using your payment stub for loans, housing, and taxes
When you apply for a mortgage, car loan, or personal loan, lenders ask for recent pay stubs to verify your income. They want to see your gross pay and your YTD earnings to confirm you've been employed consistently. A stub from the current month is usually what they need, but some lenders ask for the last two or three months.
Landlords and property managers use stubs the same way—to confirm you earn enough to afford rent. Many require that your monthly gross income be at least three times the monthly rent. Your stub proves what you actually earn, not what you claim.
At tax time, your W-2 form (which your employer sends in January) will match the YTD totals on your final stub of the year. You use the W-2 to file your tax return. If you think there's an error on your W-2, compare it to your last few stubs from the previous year. If the numbers don't match, contact your employer's payroll department to request a corrected W-2.
Frequently Asked Questions
What's the difference between gross pay and net pay?
Gross pay is what you earn before any deductions. Net pay is what's left after taxes, insurance, retirement contributions, and other deductions come out. Net pay is the amount actually deposited into your bank account or printed on your check. Your gross pay is what lenders and landlords look at to determine if you can afford a loan or rent.
Why does my federal tax withholding change from paycheck to paycheck?
Federal withholding is calculated on each individual paycheck based on your gross pay for that period. If you work overtime one week, your gross pay is higher and so is your withholding. Bonuses, commissions, or unpaid time off also change your gross pay and therefore your withholding. This is normal and expected.
Can I change how much tax is withheld from my paycheck?
Yes. Fill out a new W-4 form and submit it to your payroll department. You can claim more dependents to reduce withholding or fewer dependents to increase it. The change takes effect on your next paycheck. If you're expecting a large refund, you might want to reduce withholding. If you owe money at tax time, you might want to increase it.
Do I need to keep my old payment stubs?
Yes. Keep them for at least one year, and longer if you might need them for a loan application or to dispute a tax issue. Store them in a safe place—a folder, file, or digital copy. When you get your W-2 in January, compare the year-to-date totals on your last stub to the W-2 to make sure they match.
What should I do if my stub shows a deduction I didn't authorize?
Contact your payroll department immediately. Explain which deduction shouldn't be there and ask them to remove it or correct it. They'll investigate and either fix it on your next paycheck or explain why it's there. If it's a wage garnishment, you'll need to work with the agency that issued the order to have it lifted.