Every time you get paid, your gross pay and your net pay are two very different numbers. The gap between them is made up of payroll deductions. Some of those deductions are required by law. Others are voluntary choices you or your employer make. All of them affect how much money actually lands in your bank account.
This guide breaks down every single payroll deduction you will see on a pay stub in 2026, explains exactly how each one is calculated, and shows you how the entire system works from gross pay all the way down to your final take-home amount.
Whether you are an employee trying to understand your paycheck, a freelancer figuring out your tax obligations, or a small business owner setting up payroll for the first time, this is the only payroll deductions guide you will need.
What You Will Learn in This Guide
- What Payroll Deductions Are and How They Work
- Mandatory vs Voluntary Deductions
- FICA Taxes Explained: Social Security and Medicare
- Federal Income Tax Withholding Explained
- State Income Tax Withholding Explained
- Pretax Deductions and How They Lower Your Tax Bill
- Post-Tax Deductions Explained
- How All Deductions Work Together: A Complete Example
- Payroll Deductions for Self-Employed and Freelancers
- How to Check Your Deductions Are Correct
- Frequently Asked Questions
What Payroll Deductions Are and How They Work
A payroll deduction is any amount subtracted from an employee’s gross pay before or after taxes are calculated. The result after all deductions have been removed is called net pay, which is the amount the employee actually receives.
Payroll deductions fall into two broad categories. Some are required by federal or state law and apply to every eligible employee automatically. Others are voluntary and only apply when an employee has chosen to participate in a specific benefit or savings program.
Understanding payroll deductions matters for three important reasons.
For employees: Knowing what is being taken out of your paycheck and why helps you verify that your employer is withholding the correct amounts. It also helps you make smart decisions about voluntary deductions that can reduce your tax burden.
For small business owners: Understanding payroll deductions is essential for running payroll accurately, staying compliant with federal and state tax laws, and avoiding costly penalties from the IRS.
For freelancers and self-employed workers: You are responsible for paying both sides of every payroll tax yourself. Understanding how these deductions work for employees helps you calculate your own quarterly estimated tax payments correctly.
Related: What Is a Pay Stub? The Complete Beginner Guide
Mandatory vs Voluntary Deductions
Before diving into the details, it helps to understand the fundamental difference between deductions that you cannot opt out of and those that are entirely your choice.
Mandatory Payroll Deductions
Mandatory deductions are required by law. Your employer has no choice but to withhold them, and you, as an employee, have no option but to skip them. These include federal income tax, state income tax where applicable, Social Security tax, and Medicare tax.
Mandatory deductions exist because federal and state governments require that income taxes be collected at the source rather than waiting until employees file their annual tax returns. This system ensures a steady flow of tax revenue throughout the year and reduces the risk of employees facing large, unexpected tax bills in April.
Voluntary Payroll Deductions
Voluntary deductions are amounts you choose to have withheld from your paycheck to pay for specific benefits or savings programs. You opt into them and can often opt out during open enrollment periods.
Common voluntary deductions include contributions to a 401k or other retirement plan, health insurance premiums, dental and vision insurance premiums, contributions to a Health Savings Account or Flexible Spending Account, life insurance premiums, and contributions to commuter benefit programs.
Voluntary deductions are further divided into pretax and post-tax categories, which we cover in detail in Sections 6 and 7.
FICA Taxes Explained: Social Security and Medicare
FICA stands for the Federal Insurance Contributions Act. It is the federal law that requires both employees and employers to contribute to two specific government programs: Social Security and Medicare. FICA taxes are mandatory for almost all employees and self-employed individuals in the United States.
What Is Social Security Tax?
Social Security tax funds the federal retirement, disability, and survivors benefit program that provides income to retired workers, people with qualifying disabilities, and the families of deceased workers.
2026 Social Security Tax Rate for Employees: 6.2 percent
2026 Social Security Wage Base: 176,100 dollars
This means that 6.2 percent is withheld from every paycheck until your year-to-date gross wages reach 176,100 dollars for the calendar year. Once you cross that threshold, Social Security withholding stops completely for the remainder of the year, which results in a noticeable increase in your take-home pay.
Example: An employee earning 4,000 dollars gross per bi-weekly period has 248 dollars withheld for Social Security each pay period (4,000 multiplied by 0.062). Once their year-to-date earnings reach 176,100 dollars, the withholding stops.
Employer match: Your employer pays an additional 6.2 percent on your behalf directly to the IRS. This is separate from your paycheck and does not affect your net pay, but it is an important part of the total cost of employing you.
What Is Medicare Tax?
Medicare tax funds the federal health insurance program that provides medical coverage for people aged 65 and older and certain individuals with disabilities.
2026 Medicare Tax Rate for Employees: 1.45 percent
Medicare Wage Base: There is no wage cap for Medicare. The 1.45 percent applies to every dollar of gross wages, regardless of how much you earn.
Additional Medicare Surtax: Employees earning more than 200,000 dollars per year are subject to an additional 0.9 percent Medicare surtax on earnings above that threshold. Unlike the standard Medicare tax, this additional 0.9 percent is only the employee’s responsibility. The employer does not match it.
Example: An employee earning 4,000 dollars gross per period has 58 dollars withheld for Medicare (4,000 multiplied by 0.0145).
Employer match: Your employer also pays 1.45 percent of your wages for Medicare on top of your contribution.
Combined FICA Rate Summary for 2026
| Tax |
Employee Rate |
Employer Rate |
Wage Cap |
| Social Security |
6.2% |
6.2% |
$176,100 |
| Medicare |
1.45% |
1.45% |
No cap |
| Additional Medicare |
0.9% |
0% |
Above $200,000 |
| Total FICA (Employee) |
7.65% |
7.65% |
Up to applicable wage caps |
Who Is Exempt From FICA?
A small number of workers are exempt from FICA taxes. These include certain student workers employed by the school they attend, some nonresident aliens on specific visa types, members of certain religious groups that have opted out of Social Security, and some state and local government employees covered by a separate pension system.
Related: What Does YTD Mean on a Pay Stub?
Federal Income Tax Withholding Explained
Federal income tax is the largest deduction on most employees’ pay stubs. Unlike FICA taxes, which apply at a flat rate, federal income tax is calculated using a progressive tax bracket system and varies significantly from person to person based on income level and filing status.
How Federal Income Tax Withholding Works
Your employer does not calculate your actual tax liability for the year. Instead, they estimate how much federal income tax you will owe based on information you provide on your W-4 form and then withhold that estimated amount from each paycheck throughout the year.
At the end of the year, when you file your tax return, your actual tax liability is calculated. If your employer withheld more than you owe, you receive a refund. If they withheld less, you pay the difference.
The W-4 Form: Your Withholding Control Panel
The W-4 is the form you fill out when you start a new job that tells your employer how to calculate your federal income tax withholding. The current version of the W-4 asks for your filing status, whether you have multiple jobs or a working spouse, how many dependents you are claiming, and any additional withholding you want taken out each period.
You can and should update your W-4 whenever your life situation changes. Getting married, having a child, buying a home, or taking on a second job are all events that can significantly affect how much federal tax you owe and, therefore, how much should be withheld from each paycheck.
2026 Federal Income Tax Brackets
Federal income tax uses a marginal rate system, meaning different portions of your income are taxed at different rates. You do not pay the top rate on all your income, only on the portion that falls within each bracket.
Single Filers 2026:
| Taxable Income |
Tax Rate |
| Up to $11,925 |
10% |
| $11,926 to $48,475 |
12% |
| $48,476 to $103,350 |
22% |
| $103,351 to $197,300 |
24% |
| $197,301 to $250,525 |
32% |
| $250,526 to $626,350 |
35% |
| Above $626,350 |
37% |
Married Filing Jointly 2026:
| Taxable Income |
Tax Rate |
| Up to $23,850 |
10% |
| $23,851 to $96,950 |
12% |
| $96,951 to $206,700 |
22% |
| $206,701 to $394,600 |
24% |
| $394,601 to $501,050 |
32% |
| $501,051 to $751,600 |
35% |
| Above $751,600 |
37% |
How Marginal Brackets Work in Practice
An important point that confuses many people: moving into a higher tax bracket does not mean all your income is suddenly taxed at the higher rate. Only the income above the threshold moves into the higher bracket.
For example, a single filer earning 60,000 dollars in 2026 pays 10 percent on the first 11,925 dollars, 12 percent on the next portion up to 48,475 dollars, and 22 percent only on the remaining amount above 48,475 dollars. Their effective overall tax rate is significantly lower than 22 percent.
The Standard Deduction in 2026
Before federal income tax rates are applied to your income, the IRS allows most taxpayers to subtract a standard deduction. For 2026, the standard deduction is 15,000 dollars for single filers and 30,000 dollars for married couples filing jointly.
This means a single employee earning 50,000 dollars in gross wages has a federal taxable income of 35,000 dollars after the standard deduction, not 50,000 dollars.
Create a Pay Stub That Shows Your Federal Tax Withholding Correctly at CheckStubGenerator.com
State Income Tax Withholding Explained
In addition to federal income tax most employees also have state income tax withheld from each paycheck. State tax rates, structures, and requirements vary enormously across the country.
States With No Income Tax
Nine states do not levy a state income tax on wages. If you live and work in one of these states, you will not see a state income tax line on your pay stub.
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming currently have no state income tax on earned wages.
States With Flat Income Tax Rates
Some states use a single flat rate that applies to all income, regardless of how much you earn. This means everyone in the state pays the same percentage of their income in state tax.
States using flat rates include Arizona, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Mississippi, North Carolina, Pennsylvania, and Utah. Rates range from 2.5 percent in Arizona to 5.05 percent in Massachusetts.
States With Progressive Income Tax Rates
Most states follow a progressive bracket system similar to the federal system, where higher incomes are taxed at higher rates. California has the highest top marginal state income tax rate in the country at 13.3 percent for very high earners. Other states with progressive systems include New York, New Jersey, Oregon, Minnesota, and Vermont.
State Withholding Forms
Just as you fill out a federal W-4 to tell your employer how to calculate federal withholding, many states have their own equivalent state withholding certificate. Your employer should provide you with the appropriate state form when you are hired.
Local Income Taxes
Some cities and counties impose their own local income taxes on top of state taxes. These are most common in states like Ohio, Pennsylvania, Kentucky, and New York City. If you work in a jurisdiction with a local income tax, you will see an additional deduction line on your pay stub.
Related: Pay Stub Requirements by State: All 50 States 2026 Guide
Pretax Deductions and How They Lower Your Tax Bill
One of the most valuable but least understood aspects of payroll deductions is the difference between pretax and post-tax deductions. Pretax deductions reduce the amount of your income that is subject to federal and state income tax, which means they directly lower your tax bill.
How Pretax Deductions Work
When a deduction is taken on a pretax basis it is subtracted from your gross pay before taxes are calculated. This reduces your taxable income for the period which in turn reduces the amount of federal and state income tax withheld.
Note that pretax deductions do not reduce your Social Security and Medicare taxable wages in most cases. FICA taxes are generally calculated on gross wages before most pretax deductions are applied, with the notable exception of certain Section 125 cafeteria plan deductions.
401k and Traditional Retirement Contributions
Contributions to a traditional 401k plan are made on a pretax basis under IRS Section 401(k). The contribution comes out of your paycheck before federal and state income taxes are calculated, which means every dollar you contribute effectively costs you less than a dollar in take-home pay.
2026 401 (k) Contribution Limits:
The employee contribution limit for 2026 is 23,500 dollars. Employees aged 50 and older can make an additional catch-up contribution of 7,500 dollars for a total of 31,000 dollars. Employees aged 60 to 63 have a special higher catch-up limit of 11,250 dollars in 2026, allowing a total contribution of 34,750 dollars.
Example of the tax benefit: An employee in the 22 percent federal tax bracket who contributes 500 dollars per pay period to their 401k reduces their federal income tax by 110 dollars that period (500 multiplied by 0.22). The net cost of saving 500 dollars is only 390 dollars in reduced take-home pay.
Health Insurance Premiums
Most employer-sponsored health insurance plans are set up as Section 125 cafeteria plans, which means the employee’s share of the premium is deducted on a pretax basis. This reduces both federal and state taxable income and also reduces the FICA tax base for Social Security and Medicare.
Example: An employee paying 300 dollars per month toward their health insurance premium through a Section 125 plan saves approximately 23 dollars in FICA taxes alone each month in addition to income tax savings.
Dental and Vision Insurance
Like medical insurance, employer-sponsored dental and vision premiums are typically deducted on a pretax basis when offered through a Section 125 plan. The tax savings are smaller given the lower premium amounts, but they still reduce your taxable income.
Health Savings Account Contributions
An HSA is a tax-advantaged savings account available to employees enrolled in a high-deductible health plan. Contributions made through payroll deduction are pretax, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. This makes the HSA one of the most tax-efficient savings vehicles available.
2026 HSA Contribution Limits: 4,300 dollars for individual coverage and 8,550 dollars for family coverage. Employees aged 55 and older can contribute an additional 1,000 dollars.
Flexible Spending Accounts
An FSA allows employees to set aside pretax dollars for qualified medical expenses or dependent care expenses. Unlike an HSA, FSA funds are generally use-it-or-lose-it within the plan year, though some plans allow a small rollover or a grace period.
2026 Healthcare FSA Limit: 3,300 dollars per year.
2026 Dependent Care FSA Limit: 5,000 dollars per year per household.
Commuter Benefits
Employees can use pretax dollars to pay for qualifying commuting costs, including transit passes and vanpool expenses up to 315 dollars per month in 2026, and qualified parking up to 315 dollars per month. Using pretax commuter benefits can save hundreds of dollars in taxes each year for employees with significant commuting costs.
Generate a Pay Stub Showing All Your Pretax Deductions at CheckStubGenerator.com
Post-Tax Deductions Explained
Post-tax deductions are taken from your paycheck after all taxes have been calculated and withheld. They do not reduce your taxable income, but they may provide other valuable financial benefits.
Roth 401k Contributions
A Roth 401k is funded with after-tax dollars, meaning contributions are made after federal and state income taxes have already been applied. The benefit comes later: your investment grows tax-free, and qualified withdrawals in retirement are completely tax-free.
The same contribution limits apply to Roth 401k as to traditional 401k. An employee can split contributions between traditional and Roth 401 (k) up to the combined limit of 23,500 dollars in 2026.
Life Insurance Premiums
Employer-sponsored basic life insurance up to 50,000 dollars of coverage is typically paid for by the employer with no cost to the employee. Supplemental life insurance beyond that threshold is usually offered as a voluntary post-tax deduction.
Disability Insurance
Short-term and long-term disability insurance premiums deducted on a post-tax basis mean that any disability benefit payments you receive in the future are tax-free income. If premiums are paid pretax, then disability benefits are taxable. Many employees prefer post-tax disability deductions for this reason.
Wage Garnishments
A wage garnishment is a court-ordered post-tax deduction that your employer is legally required to withhold from your paycheck and send directly to a creditor, government agency, or court. Common garnishments include child support and alimony orders, federal or state tax debts, student loan defaults, and creditor judgments.
Wage garnishments are not voluntary. Once your employer receives a garnishment order, they must comply regardless of your wishes. Federal law limits how much of your disposable income can be garnished in most situations to protect employees from losing their entire paycheck.
Union Dues
Employees who belong to a union typically have their dues deducted on a post-tax basis from each paycheck. The amount varies by union contract and membership classification.
Charitable Contributions
Some employers offer payroll deduction programs that allow employees to contribute to charitable organisations directly from their paycheck. These are post-tax deductions, and the employee can claim a charitable deduction on their tax return if they itemise.
How All Deductions Work Together: A Complete Example
The best way to understand payroll deductions is to see how they all interact in a real-world calculation from gross pay all the way down to net pay.
Employee Profile:
Name: Sarah M. Filing status: Single Annual salary: 72,000 dollars Pay frequency: Bi-weekly (26 pay periods per year) Gross pay per period: 2,769.23 dollars
Pretax Deductions: 401 (k) contribution (6 percent of gross): 166.15 dollars Health insurance premium: 125.00 dollars Dental insurance: 12.00 dollars
Taxable Gross Pay After Pretax Deductions: 2,769.23 minus 303.15 equals 2,466.08 dollars
FICA Calculations (based on full gross pay of 2,769.23 dollars): Social Security (6.2 percent): 171.69 dollars, Medicare (1.45 percent): 40.15 dollars
Federal Income Tax: Based on 2026 withholding tables for a single filer at 2,466.08 dollars, taxable bi-weekly income: approximately 247.00 dollars
State Income Tax: Assuming a state with a flat 5 percent rate applied to taxable gross: 123.30 dollars
Post-Tax Deductions: Supplemental life insurance: 8.50 dollars
Net Pay Calculation:
| Item |
Amount |
| Gross Pay |
$2,769.23 |
| 401(k) Pretax |
−$166.15 |
| Health Insurance Pretax |
−$125.00 |
| Dental Pretax |
−$12.00 |
| Federal Income Tax |
−$247.00 |
| Social Security Tax |
−$171.69 |
| Medicare Tax |
−$40.15 |
| State Income Tax |
−$123.30 |
| Life Insurance (Post-Tax) |
−$8.50 |
| Net Pay |
$1,875.44 |
Sarah’s effective take-home rate is approximately 67.7 percent of her gross pay. Her total tax and deduction burden represents 32.3 percent of her gross wages.
Notice that Sarah’s pretax deductions of 303.15 dollars reduced her federal and state taxable income, saving her approximately 93 dollars in income taxes this period (303.15 multiplied by her marginal rate of roughly 30 percent combined federal and state). Her actual cost of those 303.15 dollars in benefits was only about 210 dollars in reduced take-home pay.
Related: Gross Pay vs Net Pay: What Is the Real Difference?
Also see: How to Read a Pay Stub: Every Line Item Explained
Payroll Deductions for Self-Employed and Freelancers
If you work for yourself as a freelancer, independent contractor, or small business owner, payroll deductions work very differently for you. Understanding this is critical because the stakes are higher. There is no employer withholding taxes on your behalf throughout the year, which means you must manage your own tax obligations proactively.
Self-Employment Tax: Paying Both Sides of FICA
When you are an employee, your employer matches your Social Security and Medicare contributions. As a self-employed person, you are both the employee and the employer, which means you owe both sides of FICA.
Self-employment tax rate: 15.3 percent (12.4 percent Social Security plus 2.9 percent Medicare)
This 15.3 percent applies to your net self-employment income up to the Social Security wage base of 176,100 dollars in 2026. Medicare at 2.9 percent continues above that threshold with no cap.
The self-employment tax deduction: The IRS allows self-employed individuals to deduct half of their self-employment tax from their gross income when calculating adjusted gross income. This partial deduction partially offsets the burden of paying both sides of FICA.
Quarterly Estimated Tax Payments
Self-employed individuals are required to pay their taxes in quarterly instalments throughout the year rather than in a single payment at tax time. The four estimated tax payment deadlines for 2026 are April 15, June 16, September 15, and January 15 of 2027.
Each quarterly payment should cover both your income tax and your self-employment tax for that quarter. The IRS Safe Harbor rule allows you to avoid underpayment penalties by paying either 100 percent of your prior year’s tax liability or 90 percent of your current year’s expected liability, whichever is smaller.
Pretax Deductions Available to Self-Employed Workers
Self-employed individuals can access many of the same pretax savings that employees enjoy through employer benefit plans, just through different mechanisms.
SEP-IRA: A Simplified Employee Pension allows self-employed individuals to contribute up to 25 percent of net self-employment income or 70,000 dollars in 2026, whichever is less. Contributions are fully tax-deductible.
Solo 401k: A one-participant 401k allows the same employee contribution limits as a workplace plan (23,500 dollars in 2026) plus an employer contribution of up to 25 percent of compensation, for a combined limit of 70,000 dollars.
Self-employed health insurance deduction: Self-employed individuals who pay for their own health insurance can deduct 100 percent of their premiums from their gross income as an above-the-line deduction.
HSA contributions: Self-employed individuals enrolled in a High Deductible Health Plan can contribute to an HSA on a pretax basis just like employees.
Related: Self-Employed Pay Stub Generator: The Complete Guide
Also see: Proof of Income Documents: 8 Types That Work for Freelancers
How to Check Your Deductions Are Correct
Even well-run payroll systems make errors. Knowing how to verify your own deductions gives you the ability to catch problems before they compound across multiple pay periods and create tax issues at year’s end.
Check 1: Verify Your FICA Calculations
Social Security should be exactly 6.2 percent of your gross wages for the period. Medicare should be exactly 1.45 percent. If you divide the withheld amounts by your gross pay and the percentages do not match, there is an error that needs to be investigated.
Also, check that Social Security withholding stops once your year-to-date gross pay reaches 176,100 dollars. If it continues beyond that threshold, your employer owes you a refund.
Check 2: Review Your Federal Withholding Against the IRS Estimator
Visit the IRS withholding estimator at IRS.gov and input your income and W-4 information. The tool will estimate your expected annual federal tax and calculate the recommended withholding per period. Compare this to what is actually being withheld on your pay stub. A significant discrepancy suggests you may need to update your W-4.
Check 3: Confirm Pretax Deductions Are Being Applied Before Tax Calculations
If you participate in a 401k, health insurance, or other pretax benefit, verify that your taxable wages on the pay stub are lower than your gross wages by the correct pretax deduction amounts. If taxable wages equal gross wages, your pretax deductions may not be correctly coded in payroll.
Check 4: Verify Voluntary Deduction Amounts Match Your Elections
Your 401 (k) contribution percentage, health insurance premium, and other voluntary deductions should match the elections you made during open enrollment. Pull up your benefit election forms and compare them to what is showing on your pay stub. Any discrepancy should be reported to HR immediately.
Check 5: Review Year-to-Date Totals for Consistency
The YTD figure for each deduction should equal the per-period amount multiplied by the number of pay periods that have passed. If your YTD does not match this calculation, a prior period may have been processed incorrectly.
Found an error? Report it in writing to your payroll or HR department as soon as possible. Most payroll errors can be corrected in the next pay cycle. Document everything, including the date you reported the issue, who you spoke with, and what correction was promised.
Frequently Asked Questions About Payroll Deductions
What is the difference between FICA and federal income tax?
FICA and federal income tax are both mandatory deductions, but they fund different things and are calculated very differently. FICA taxes, which are Social Security and Medicare, are calculated at flat percentages of your gross wages regardless of your filing status or deductions. Federal income tax is calculated using a progressive bracket system based on your taxable income after allowable deductions, and the amount varies based on your W-4 elections and income level.
How much is taken out of a paycheck for taxes?
The total amount taken out for taxes depends on your income level, filing status, state of residence, and pretax deductions. For most middle-income employees, the combined federal, state, and FICA deductions represent between 20 and 35 percent of gross pay. The exact amount varies significantly based on individual circumstances.
What does pretax mean on a pay stub?
Pretax means a deduction is taken from your gross pay before income taxes are calculated. This reduces your taxable income, which lowers the amount of federal and state income tax withheld from your paycheck. Common pretax deductions include 401 (k) contributions, health insurance premiums, and HSA contributions.
Can I reduce my payroll deductions?
You can influence some of your deductions but not others. You cannot opt out of Social Security, Medicare, or income tax withholding entirely. However, you can reduce your federal income tax withholding by updating your W-4, and you can reduce your overall tax burden by maximising pretax deductions like 401k contributions and HSA contributions.
Why did my paycheck increase mid-year?
A mid-year increase in take-home pay is often caused by hitting the Social Security wage cap. Once your year-to-date gross pay reaches 176,100 dollars in 2026, Social Security withholding stops, which adds 6.2 percent of your gross pay back into your take-home amount for the rest of the year. Other possible reasons include a raise, a change in your W-4, or reaching the maximum on a voluntary deduction.
What is the FICA rate for 2026?
The combined FICA rate for employees in 2026 is 7.65 percent of gross wages. This is made up of 6.2 percent for Social Security on the first 176,100 dollars of wages and 1.45 percent for Medicare on all wages with no cap.
Are health insurance premiums taken out before or after taxes?
In most employer-sponsored health insurance plans, the employee’s share of premiums is deducted on a pretax basis through a Section 125 cafeteria plan. This means the deduction happens before federal income tax, state income tax, and, in many cases, FICA taxes are calculated, which reduces the employee’s overall tax burden.
What happens to my deductions if I get a raise?
A raise increases your gross pay, which may push more of your income into a higher federal or state tax bracket, resulting in a higher marginal tax rate on the additional income. Your FICA deductions increase proportionally since they are percentage-based. Your flat-amount pretax deductions, like a fixed health insurance premium, stay the same but represent a smaller percentage of your new, higher gross pay.
Do employers pay any payroll taxes?
Yes. Employers are required to match the employee’s Social Security contribution of 6.2 percent and the Medicare contribution of 1.45 percent. Employers also pay federal unemployment tax (FUTA) of 6 percent on the first 7,000 dollars of each employee’s wages per year and state unemployment tax (SUTA) at rates that vary by state. These employer-side taxes are separate from your paycheck and do not affect your take-home pay, but they represent a high additional cost of employment for businesses.
What is the difference between tax deductions and payroll deductions?
Tax deductions, such as the mortgage interest deduction or charitable contributions, are items you claim on your annual tax return to reduce your taxable income when you file. Payroll deductions are amounts withheld from each paycheck throughout the year. Some payroll deductions, like pretax 401k contributions, also function as tax deductions, but the two terms refer to different stages of the tax process.
Quick Reference: 2026 Payroll Deduction Rates at a Glance
| Deduction |
Rate |
Cap or Limit |
Pretax or Post-Tax |
| Social Security (Employee) |
6.2% |
$176,100 wage base |
Post-tax basis, mandatory |
| Medicare (Employee) |
1.45% |
No cap |
Post-tax basis, mandatory |
| Additional Medicare |
0.9% |
Earnings above $200,000 |
Post-tax basis, mandatory |
| Federal Income Tax |
10% to 37% |
Based on tax brackets |
Mandatory, adjusted by W-4 |
| State Income Tax |
0% to 13.3% |
Varies by state |
Mandatory where applicable |
| 401(k) Traditional |
Up to employee election |
$23,500 annual limit |
Pretax |
| 401(k) Roth |
Up to employee election |
Same $23,500 combined limit |
Post-tax |
| Health Insurance Premium |
Varies by plan |
No IRS limit on employee share |
Pretax through Section 125 |
| HSA Contribution |
Up to employee election |
$4,300 individual or $8,550 family |
Pretax |
| Healthcare FSA |
Up to employee election |
$3,300 annual limit |
Pretax |
| Dependent Care FSA |
Up to employee election |
$5,000 annual limit |
Pretax |
| Commuter Benefits |
Up to employee election |
$315 per month |
Pretax |
More Resources for Understanding Your Pay Stub
See Exactly How Your Payroll Deductions Look on a Real Pay Stub
Now that you understand every payroll deduction from FICA to federal tax to pretax benefits, the next step is seeing them all laid out correctly on a professional pay stub. Whether you are an employee verifying your deductions, a small business owner creating stubs for your team, or a freelancer documenting your income, CheckStubGenerator.com makes it fast and accurate.
Create My Pay Stub With Correct Deductions at CheckStubGenerator.com
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For legitimate payroll documentation only. Always ensure all figures accurately reflect actual wages and withholdings.
