Guide to your paycheck

Your paycheck offers a lot more than just the cash you take home. A deeper look offers useful information about what you spend on taxes, benefits and other deductions.

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1. Gross pay

The total amount you are paid during each cycle—your pay before any deductions are taken out. This is not the amount you take home, however.

2. Mandatory deductions

The deductions you have to pay by law are:

  • Federal income tax—from 10–39.6%, depending on income
  • State income tax (not in all states)—from 1–10% or more
  • Social Security tax—6.2%
  • Medicare tax—1.45%

3. Voluntary deductions

You may have elected to pay for these things pre-tax:

  • Health insurance premiums
  • Retirement account contributions
  • Flexible Spending Accounts (FSAs)
  • Commuter benefits

* The abbreviations on your pay stub might not be obvious—which one represents retirement, for example. Check with HR if you have questions.

4. Net pay

Your net pay is your gross pay, minus mandatory and voluntary deductions. It’s also known as your take-home pay, or the amount of pay you actually take home at the end of the day.

Gross pay – Mandatory deductions – Voluntary deductions = Net pay

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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