Reading your pay stub: 8 factors that could be affecting your take-home pay


The Tax Cuts and Jobs Act passed in December 2017 was probably the single biggest factor in recent memory to impact what your paycheck looks like.

But do you know all of the other things that play into what you take home each pay period?

RELATED: New withholding rules mean more money in your pocket

Here’s how to read your pay stub

To understand what factors affect your paycheck, we first have to define a couple of terms.

You may hear “net pay” and “gross pay” and not really know what they mean. Simply put, gross pay is the money you earn before taxes and deductions. Your net income, on the other hand, is the money you actually bring home after taxes and deductions.

If you have trouble remembering which term is which, try this: “Gross” has five letters, while “net” only has three. Therefore, your gross pay is the bigger amount you start out with, and the net is the smaller amount you bring home.

It’s a simple trick, but it works!

Examining your pay stub

Now let’s take a look at the taxes (called “withholdings”) and deductions you’re likely to see on your pay stub:


While everyone’s situation is different, most U.S. employees pay a fairly standard lineup of taxes that lower their gross income.

The following taxes or withholdings get automatically taken out of each paycheck before you receive it:

  • Federal income tax
  • Social Security tax
  • Medicare tax
  • State tax, if applicable in your state


On top of the withholdings, there may be other deductions that automatically come out of your paycheck.

While withholdings are generally mandatory, the deductions are elective and not everyone will have the same deductions on their pay stub. But here are some of the more common ones:

  • Insurance payments: Premiums for group medical, dental, vision, life and/or disability insurance through your employer
  • Retirement savings: Contributions to your 401(k) or other other employer-sponsored retirement plan
  • FSA/HSA: There are two flavors here. Flexible spending accounts (FSAs) are for out-of-pocket medical expenses and/or childcare costs (daycare, babysitters, after-school programs). Health savings accounts (HSAs), meanwhile, allow people to squirrel away money tax-free in interest-bearing accounts for qualified current and future medical expenses.
  • 401(k) loan: If you’ve elected to borrow against your 401(k) — something money expert Clark Howard does not advise — you’ll see a line item for the repayment of that loan on your pay stub.

Again, these deductions are basically voluntary. Not everyone does an FSA, for example, or contributes to a 401(k) — though you definitely should think about doing so if you ever hope to retire!

Recent changes to your paycheck because of the new tax law

When the new tax law went into effect for 2018, the Internal Revenue Service had to scramble to draw up with new withholding tables for companies to follow when calculating your paycheck going forward.

Here’s what they came up with:

new IRS withholding tax tables

The tax table above covers most people who are paid weekly or biweekly. But you can view all of the new 2018 withholding tables here.

These withholding tax tables basically tell your employer’s payroll department how much money to hold out of your paycheck to comply with the new Tax Cuts and Jobs Act that overhauled our nation’s tax code.

Unfortunately, a recent report from the non-partisan Government Accountability Office suggests around 30 million of us may owe the feds money when we file in 2019.

That’s because for many of us, our employers aren’t withholding enough out of each paycheck this year to comply with the new tax tables.


Ultimately, it’s your responsibility to adjust your withholding in order to account for the new tax law. The IRS has a newly updated withholding calculator to help you figure out how much you should have withheld from each check.

In order to adjust your withholding, you’ll simply need to fill out a new W-4 and submit it to your employer’s payroll department.

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