What Deductions Are Taken From My Paycheck?

(Tax, Health Insurance, Pension, Social Security, and More)

Understanding your paycheck can feel confusing—especially when the amount you expect to see is noticeably larger than the amount that actually arrives in your bank account. That difference isn’t a mistake. It reflects a series of required and optional deductions that fund taxes, benefits, and long-term financial protections.

This guide breaks down the most common paycheck deductions, why they exist, and how they affect your take-home pay.

1. Mandatory Payroll Deductions

Mandatory deductions are required by law, regardless of your employer or job type. These include federal taxes, Social Security, Medicare, and—depending on where you live—state or local taxes.

1.1 Federal Income Tax

This is the biggest mandatory deduction for most workers. The exact amount withheld depends on:

• Your income level

• Your filing status (single, married, head of household)

• Information you provide on your W-4 form

• Current IRS tax brackets

Federal income tax pays for national programs such as defense, federal infrastructure, public services, and federal benefits systems.

1.2 State and Local Income Taxes

Not every state levies income tax, but most do. The rules vary widely:

• Some states have a flat tax rate for everyone.

• Others use tax brackets similar to the federal system.

• A few charge no income tax at all (e.g., Texas, Florida).

• Some cities and counties also collect local income tax.

If you see multiple line items for taxes, your state or city may be one reason why.

1.3 Social Security Tax

Social Security is part of the Federal Insurance Contributions Act (FICA).
Employees pay 6.2% of their wages, and employers pay an additional 6.2%.

This deduction funds:

• Retirement benefits

• Disability benefits

• Survivor benefits

The Social Security tax only applies to income up to a yearly wage limit (called the wage base).

1.4 Medicare Tax

Another FICA deduction, Medicare helps fund federal health insurance for people 65+ or with certain disabilities.
Employees pay 1.45% of their income, matched by the employer.

High-earning workers (over a specific threshold) may also pay an additional 0.9% Medicare surtax, though employers do not match this extra amount.

2. Optional (Voluntary) Payroll Deductions

These deductions only appear on your paycheck if you enroll in employer-sponsored programs. Though optional, many are valuable and can reduce your taxable income depending on how they’re set up.

2.1 Health Insurance Premiums

If your employer offers health insurance, your share of the cost is typically deducted from your paycheck. Premiums may cover:

• Medical insurance

• Dental insurance

• Vision insurance

Most employer health plans are pre-tax, meaning the deduction lowers your taxable income.

2.2 Retirement or Pension Contributions

Retirement deductions depend on the plan your company offers. Common options include:

401(k) or 403(b) contributions

These are the most common employer-sponsored retirement plans.

• Traditional 401(k): Contributions are pre-tax.

• Roth 401(k): Contributions are after-tax but withdrawals are tax-free later.

Some employers match part of your contributions—an immediate financial benefit.

Pension plan contributions

Less common today, pensions are employer-managed retirement plans guaranteeing a future monthly payout.
Your paycheck may show deductions for:

• Employee pension contributions

• Required union pension funds

2.3 Health Savings Account (HSA) or Flexible Spending Account (FSA)

These accounts let you set aside pre-tax money for medical expenses.

• HSA (Health Savings Account): Requires a high-deductible health plan; money rolls over year to year.

• FSA (Flexible Spending Account): Funds generally must be used within the plan year (some plans allow small carryovers).

These deductions reduce taxable income and can save hundreds annually.

2.4 Life and Disability Insurance

Employers often offer:

• Term life insurance

• Short-term disability

• Long-term disability

Some coverage is free and employer-paid, but optional upgrades usually appear as paycheck deductions.

2.5 Commuter or Transportation Benefits

In some workplaces—especially in large cities—you can deduct pre-tax money to cover:

• Public transit passes

• Parking costs

• Vanpooling programs

2.6 Union Dues

If your job requires union membership, your paycheck may include:

• Regular union dues

• Fees for specific union programs

• Assessments for special causes or benefits

Union dues are generally post-tax deductions (though sometimes tax-deductible on your return).

3. Less Common Paycheck Deductions

Some workers see additional line items that may seem unfamiliar. These can include:

3.1 Wage Garnishments

A garnishment occurs when a court or government agency orders your employer to withhold money for:

• Child support

• Alimony

• Back taxes

• Student loan payments

• Court judgments

Employers must legally comply, and garnishments take priority over most other voluntary deductions.

3.2 Equipment or Uniform Costs

Some employers deduct the cost of:

• Work uniforms

• Tools or safety equipment

• Lost equipment replacement

However, there are strict legal limits on what employers can deduct, especially if a deduction would reduce your pay below minimum wage.

3.3 Charity Contributions

If your company participates in giving programs, your paycheck may list donations you elected to make through payroll deduction.

3.4 Supplemental Benefits

These vary but may include:

• Pet insurance

• Legal services plans

• Identity protection services

• Gym memberships

If you opted in, these will appear as small recurring deductions.

4. Pre-Tax vs. Post-Tax Deductions

Deductions fall into two broad categories: pre-tax and post-tax, which affect how much tax you pay.

4.1 Pre-Tax Deductions

These reduce your taxable income before taxes are calculated. Common pre-tax deductions include:

• Health insurance premiums

• Traditional 401(k) contributions

• HSA or FSA contributions

• Commuter benefits

Because they lower your taxable income, you may save money overall.

4.2 Post-Tax Deductions

These occur after taxes are withheld. Examples:

• Roth 401(k) contributions

• Union dues

• Life insurance policies not eligible for pre-tax treatment

• Charitable contributions

Post-tax deductions do not reduce your taxable income.

5. Reading Your Pay Stub

While pay stubs vary by employer and payroll system, most include:

Gross Pay

Your total earnings before any deductions:

• Hourly wages × hours worked

• Salaried pay divided by pay periods

• Overtime, bonuses, or commissions

Deductions

Usually broken down into:

• Federal withholding

• State/local withholding

• Social Security

• Medicare

• Benefits (health insurance, retirement, etc.)

Net Pay

Also called take-home pay, this is the amount you actually receive after all deductions.

If something looks unfamiliar, your employer’s HR or payroll department can provide an explanation.

6. Why Paycheck Deductions Matter

Many employees pay little attention to deductions, but they significantly affect your financial situation. Understanding them can help you:

6.1 Manage your budget

Knowing your real take-home pay helps you plan bills, savings, and expenses more accurately.

6.2 Optimize tax savings

Pre-tax deductions such as retirement contributions or HSAs can reduce your tax bill.

6.3 Make informed benefit choices

Sometimes a benefit sounds helpful but may not be worth the cost. Reviewing deductions helps you decide what to keep, adjust, or remove during open enrollment.

6.4 Prepare for the future

Retirement contributions and Social Security taxes build toward long-term financial security.

7. FAQs About Paycheck Deductions

Why is my paycheck different from my coworkers’ if we earn the same salary?

Your:

• Tax filing status

• Benefit choices

• Retirement contributions

• Garnishments

• State tax rules

…can all influence your final take-home pay.

Can I change how much tax is taken out?

Yes. You can update your W-4 form with your employer to adjust withholding.

What if I think a deduction is incorrect?

Mistakes happen. Contact HR or payroll immediately to resolve the issue.

Are bonus checks taxed differently?

Often, yes. Employers may use a flat withholding rate for supplemental wages (such as bonuses), making them appear more heavily taxed—though your total annual tax liability ultimately balances out.

8. Summary: The Most Common Paycheck Deductions

Here’s a quick overview of what you might see:

Mandatory Deductions

• Federal income tax

• State/local tax

• Social Security (FICA)

• Medicare (FICA)

Voluntary Deductions

• Health, dental, vision insurance

• Retirement plans (401(k), pension, etc.)

• HSA/FSA contributions

• Life and disability insurance

• Commuter benefits

• Union dues

Other Possible Deductions

• Garnishments (child support, taxes, loans)

• Uniform/equipment fees

• Charitable contributions

• Supplemental benefits

Final Thoughts

Your paycheck tells a detailed story about your taxes, benefits, and financial security. While it can feel discouraging to see so many deductions, most serve an important purpose—protecting your income, your health, and your future.

By understanding every line on your pay stub, you gain more control over your finances and the confidence to make smart choices about benefits, taxes, and long-term planning.