Paycheck Glossary

Every term you'll see on a pay stub, W-4, or paycheck breakdown — explained in plain language. Bookmark this page and come back whenever something on your paycheck doesn't make sense.

Gross Pay

Total earnings before any taxes or deductions are taken out. Gross pay includes your base pay (salary, hourly wages, or flat pay) plus any additional earnings like overtime, bonuses, commissions, tips, and shift differentials. This is the starting point for every paycheck calculation — all taxes and deductions are computed from gross pay or a subset of it.

Net Pay / Take-Home Pay

The amount that actually hits your bank account after all taxes and deductions are subtracted from gross pay. Net pay equals gross pay minus pre-tax deductions, minus payroll taxes (federal, state, FICA), minus after-tax deductions. This is the number that matters most on payday. See our take-home pay calculator guide for a full breakdown of how net pay is computed.

FICA

Federal Insurance Contributions Act — the law that requires employers and employees to fund Social Security and Medicare. FICA tax has two components: Social Security tax (6.2% up to $184,500 in 2026) and Medicare tax (1.45% on all wages). Together, they take 7.65% of most paychecks. Your employer pays a matching 7.65% on top of that. For a deeper dive, see What Is FICA on My Paycheck?

6.2% of your wages, up to the annual wage base limit ($176,100 in 2025, $184,500 in 2026). Once your year-to-date earnings hit the cap, Social Security tax stops being withheld for the rest of the calendar year. This is why high earners sometimes see a bump in take-home pay late in the year.

Medicare Tax

1.45% of all wages with no cap. Unlike Social Security, Medicare tax applies to every dollar you earn. An additional 0.9% surtax (called Additional Medicare Tax) kicks in on wages above $200,000 in a calendar year, bringing the combined Medicare rate to 2.35% on earnings above that threshold. Your employer does not match the additional 0.9%.

Federal Withholding

Federal income tax withheld from each paycheck. Your employer calculates this using IRS Publication 15-T: they annualize your pay, apply your W-4 adjustments (filing status, dependent credits, extra withholding), look up the tax in the bracket table, then de-annualize back to a per-period amount. The result depends on your filing status, pay frequency, and W-4 settings.

State Withholding

State income tax withheld from your paycheck. Varies significantly by state — some use progressive brackets (like federal), some charge a flat rate, and nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) have no state income tax at all. Some cities and counties also impose local income taxes on top of state tax.

W-4

IRS Form W-4, officially called the Employee's Withholding Certificate. This form tells your employer how much federal income tax to withhold from each paycheck. The current version (2020 and later) uses a four-step system: Step 1 (personal info and filing status), Step 2 (multiple jobs adjustment), Step 3 (dependent credits), and Step 4 (other adjustments including additional income, deductions, and extra withholding). Learn how each step affects your paycheck in our W-4 guide.

Filing Status

Your tax filing category on the W-4: Single, Married Filing Jointly, or Head of Household. Filing status determines which tax bracket table and standard deduction your employer uses to calculate federal withholding. Married Filing Jointly generally results in lower per-paycheck withholding than Single for the same income, because the brackets are wider and the standard deduction is larger.

Pre-Tax Deduction

A deduction subtracted from gross pay before taxes are calculated, which reduces your taxable income for the current pay period. Common examples include traditional 401(k) contributions, HSA contributions, and Section 125 health insurance premiums. The tax treatment varies: some pre-tax deductions reduce federal, state, and FICA taxable income (like HSA), while others reduce only federal and state (like traditional 401k). See our full guide to how deductions affect your paycheck for the complete breakdown of every deduction type.

After-Tax Deduction

A deduction subtracted after taxes are calculated — it comes out of your net pay and does not reduce your current tax bill. Examples include Roth 401(k) contributions, wage garnishments, and charitable contributions. Roth 401(k) contributions are taxed now but grow tax-free for retirement.

401(k)

An employer-sponsored retirement savings account. A traditional 401(k) is a pre-tax deduction — contributions reduce your federal and state taxable income now (but not FICA), and you pay taxes when you withdraw in retirement. A Roth 401(k) is an after-tax deduction — you pay taxes now, but withdrawals in retirement are tax-free. Both types calculate the contribution amount from gross pay (they are "elective deferrals from compensation" per IRS rules). See how your 401(k) affects your paycheck for a side-by-side comparison.

HSA (Health Savings Account)

A pre-tax savings account for qualified medical expenses, available if you have a high-deductible health plan. HSA contributions are one of the most tax-advantaged deductions available — they reduce federal income tax, state income tax, and FICA taxes (Social Security and Medicare). Very few deductions reduce all three. Unused funds roll over year to year and can be invested for long-term growth.

FSA (Flexible Spending Account)

A pre-tax account for healthcare or dependent care expenses, offered through your employer. FSA contributions receive similar tax treatment to HSA contributions — reducing federal, state, and FICA taxable income. The key difference is FSAs have use-it-or-lose-it rules: unspent funds at the end of the plan year are generally forfeited (with limited carryover or grace period options depending on your employer's plan).

Pay Frequency

How often you receive a paycheck. The four common frequencies are: Weekly (52 paychecks per year), Biweekly (26), Semi-monthly (24), and Monthly (12). The same annual salary produces different per-paycheck gross and net amounts depending on frequency. Pay frequency also affects how federal withholding is calculated — the IRS annualizes your per-period pay, so more frequent pay periods mean smaller individual paychecks but the same annual total. See our biweekly vs. semi-monthly comparison for details.

YTD (Year-to-Date)

Cumulative totals from January 1 through the current pay period. YTD figures appear on every pay stub and are critical for two thresholds: the Social Security wage base cap (after which Social Security tax stops) and the $200,000 Additional Medicare Tax threshold (after which the extra 0.9% begins). Without accurate YTD tracking, these caps cannot apply correctly.

Supplemental Wages

Payments beyond your regular wages, including bonuses, commissions, severance pay, retroactive pay increases, and other non-regular compensation. The IRS allows employers to withhold federal tax on supplemental wages using either a flat 22% rate or the aggregate method (which combines supplemental and regular wages, calculates total tax, then subtracts what was already withheld on regular pay). Supplemental wages exceeding $1 million in a calendar year are subject to a mandatory 37% withholding rate.

Imputed Income

Non-cash compensation that the IRS considers taxable, such as employer-paid group term life insurance coverage above $50,000, personal use of a company vehicle, or certain fringe benefits. Imputed income is included in your tax calculations (increasing federal, state, and FICA taxes) but is not part of your cash gross pay or take-home pay — you never actually receive it as cash. It shows up on your pay stub and W-2 as additional taxable income.

Frequently Asked Questions

What is the difference between gross pay and net pay?

Gross pay is your total earnings before anything is deducted — salary, hourly wages, overtime, bonuses, and other compensation. Net pay (also called take-home pay) is what hits your bank account after federal tax, state tax, FICA (Social Security and Medicare), and all deductions are subtracted.

What does FICA stand for on my pay stub?

FICA stands for Federal Insurance Contributions Act. It funds Social Security (6.2% of wages up to $184,500 in 2026) and Medicare (1.45% of all wages, plus an additional 0.9% on wages above $200,000). Combined, most workers pay 7.65% of every paycheck in FICA taxes.

What is the difference between a W-4 and a W-2?

A W-4 is a form you give your employer to tell them how much federal tax to withhold from your paychecks. A W-2 is a form your employer gives you after the end of the year showing your total wages and taxes withheld for tax filing. You fill out a W-4 when you start a job; you receive a W-2 by January 31 each year.