Payroll Deductions Explained: What Actually Comes Out of a W-2 Paycheck

6 min read · Updated July 2026

A pay stub can look like a wall of abbreviations — FICA, FIT, SIT, and a handful of benefit codes — sitting between a gross salary and a much smaller deposit. Every one of those lines exists for a specific reason, and understanding them turns a confusing document into a useful budgeting tool.

The Mandatory Tax Withholdings

• Federal Income Tax (FIT). Calculated based on your W-4 elections, filing status, and current tax brackets. This is an estimate withheld throughout the year, reconciled against your actual liability when you file a return.
• State Income Tax (SIT). Applies in most, but not all, states — see our guide to no-income-tax states for which ones skip this line entirely.
• Social Security (part of FICA). 6.2% of wages up to an annual wage base limit that adjusts each year, matched by an equal employer contribution.
• Medicare (part of FICA). 1.45% of all wages with no upper limit, plus an additional 0.9% for high earners above certain thresholds, also matched by the employer for the base rate.

Common Voluntary Deductions

• Health insurance premiums, typically deducted pre-tax, reducing your taxable wages in addition to funding coverage.
• 401(k) or other retirement plan contributions, often pre-tax (traditional) or post-tax (Roth), depending on the plan type you elect.
• Health Savings Account (HSA) or Flexible Spending Account (FSA) contributions, available if you're enrolled in an eligible high-deductible health plan.
• Life insurance, disability insurance, and other supplemental benefits offered through the employer.

Why Pre-Tax Deductions Matter

Deductions taken before taxes are calculated — most health premiums, traditional 401(k) contributions, HSA contributions — reduce your taxable wages for that pay period, which lowers both income tax and, in some cases, FICA tax owed on that portion of income. This is different from a Roth 401(k) contribution, which is taken after tax and doesn't reduce current taxable wages, in exchange for tax-free withdrawals in retirement.

A Sample Pay Stub Breakdown

This example is illustrative only — actual figures depend on your specific elections, tax bracket, and current-year rates. Our gross-to-net calculator models this same structure using your real numbers.

How This Differs Entirely for 1099 Contractors

None of this automatic withholding structure applies to 1099 income — no employer-matched FICA, no automatic tax withholding, no employer-sponsored benefits deducted at the source. See our W-2 vs. 1099 comparison for how differently the entire deduction structure works on the contractor side.

Reviewing Your Own Pay Stub

• Confirm your withholding elections match your actual tax situation, especially after a major life change (marriage, a second job, a new dependent).
• Check that benefit deductions match what you actually enrolled in during open enrollment.
• Watch for a jump in take-home pay partway through the year — this often signals you've hit the Social Security wage base limit, after which that specific deduction stops for the remainder of the year.

Frequently Asked Questions

This article is educational only and not tax or financial advice. Figures and thresholds cited are illustrative and change annually.