Every Paycheck Deduction Explained
What each line on your paycheck stub means, and whether it actually helps you.
By the Easy Guides Editorial Team
The three categories of deductions
Every paycheck deduction falls into one of three categories:
- Pre-tax deductions, taken out before federal income tax is calculated. Reduce your taxable income.
- Taxes, federal, state, local income tax plus FICA (Social Security and Medicare).
- After-tax deductions, taken out after taxes are calculated. Don't reduce your tax bill.
The order matters: pre-tax deductions reduce the amount that gets taxed, which is why they save you money on taxes. After-tax deductions don't.
Pre-tax deductions
Traditional 401(k)WORKS FOR YOU
Reduces taxable income. Contributions grow tax-deferred until retirement. $23,500 in 2025 / $24,500 in 2026 ($31,000 / $32,500 if 50 or older).
Traditional Health Insurance PremiumsWORKS FOR YOU
Reduces taxable income. Most employer-sponsored health plans qualify under Section 125.
HSA ContributionsWORKS FOR YOU
Triple tax advantage: pre-tax going in, tax-free growth, tax-free withdrawals for medical expenses. 2025 limit: $4,300 individual, $8,550 family.
FSA (Flexible Spending Account)WORKS FOR YOU
Pre-tax money for medical or dependent care expenses. Use-it-or-lose-it within the plan year. 2025 medical FSA limit: $3,200.
Dependent Care FSAWORKS FOR YOU
Pre-tax money for childcare or dependent care expenses. 2025 limit: $5,000 per household.
Commuter BenefitsWORKS FOR YOU
Pre-tax money for transit passes or qualified parking. 2025 limit: $315/month each.
Tax deductions
Federal Income Tax
Withheld based on your W-4. Reconciled on your tax return. Goes to the IRS.
Social Security Tax
6.2% of wages up to the wage base ($176,100 in 2025 / $184,500 in 2026). Funds Social Security retirement benefits.
Where this comes from: SSA, 2026 COLA fact sheet (wage base set under 42 U.S.C. §430), checked 2026-08-01 · Social Security Act §230 (42 U.S.C. §430); incorporated by IRC §3121(a)(1) for wages and IRC §1402(b) for self-employment income.
Medicare Tax
1.45% of all wages, no cap. Plus 0.9% additional on wages over $200,000. Funds Medicare healthcare for retirees.
Where this comes from: set by statute, not adjusted annually · IRC §3101(b)(2) (wages); IRC §1401(b)(2) (self-employment income).
State Income Tax
Varies by state. 0% in 9 states (FL, TX, NV, WA, AK, SD, WY, TN, NH on wages). Up to 13.3% in CA.
Local Income Tax
Some cities and counties have their own income tax, NYC, Philadelphia, San Francisco, certain Ohio cities, etc.
After-tax deductions
Roth 401(k)WORKS FOR YOU
Like traditional 401(k) but funded with after-tax money. Withdrawals in retirement are tax-free. Same contribution limit ($23,500 in 2025 / $24,500 in 2026).
Where this comes from: IRS Notice 2025-67, 2026 COLA limits, checked 2026-08-01 · IRC §402(g) (elective deferral limit); §414(v) (age-50 catch-up); §414(v)(2)(E) (ages 60-63 higher catch-up, added by SECURE 2.0 Act, P.L. 117-328 §109); indexing under §415(d).
Life Insurance Premiums
Term, whole, or universal life insurance through your employer. Some employer-paid coverage may have tax implications.
Disability InsuranceWORKS FOR YOU
Short-term and long-term disability insurance premiums. If you pay with after-tax money, benefits are tax-free if you ever need them.
Union Dues
Required if you work in a union shop. May be partially tax-deductible in some states.
Wage Garnishments
Court-ordered deductions for child support, debt collection, tax liens, or student loans in default. Limited by federal/state law.
Two questions to ask about every deduction
1. Is this deduction reducing my tax bill? Pre-tax deductions reduce your taxable income, lowering your federal (and usually state) income tax. After-tax deductions don't.
2. Is this deduction working for me long-term? Retirement contributions build wealth. HSA contributions build a tax-advantaged medical fund. Health insurance protects you from catastrophic costs. These are deductions worth maximizing. Wage garnishments and required dues aren't choices, but they're not building anything for you either.
Common questions
What are the deductions on my paycheck?
Three groups. Mandatory taxes: federal income tax, Social Security, Medicare, and usually state tax. Pre-tax benefits: retirement contributions, health premiums, HSA or FSA. Post-tax items: Roth contributions, union dues, or garnishments.
Which paycheck deductions are required?
Only taxes. Federal income tax withholding, Social Security, and Medicare are mandatory, plus state and sometimes local income tax. Everything else is a benefit you chose to enroll in.
Do pre-tax deductions save me money?
Yes. Pre-tax money is never taxed as income, so a dollar into a traditional 401(k) or a health premium costs you less than a dollar of take-home pay. That is why a 5% contribution usually shrinks your check by 3% to 4%.