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Paystub Review

How much money do you make? Now how much do you actually get?


It can be disappointing how much lower your net pay is than your gross pay. But it’s important to understand how much of your paycheck you’re NOT getting and whether there’s anything you can or should do to change that. So let’s review that pay stub!


Taxes

For most people, this consists of three line items.

  • FICA Taxes - totaling 7.65% for most people and split into two buckets.

  • OASDI taxes at 6.2%: The more you pay into this bucket over your lifetime, the higher your social security benefit will be in retirement. This tax only applies to the Social Security Wage base, which is $160,200 per person in 2023 (168,600 in 2024) and is indexed for inflation.

  • Medicare taxes at 1.45%: This portion goes to fund Medicare and doesn’t affect your ultimate Medicare benefit like the social security taxes do. This may increase with higher income.

  • Federal Income Taxes

  • You may want to adjust this with form W-4 if you have multiple sources of income or if you have non-payroll income or deductions.

  • State Income Taxes

  • These only apply to people who have income in states that have an income tax.


Pre-tax Deductions

Many of the things that come off of your paycheck are paid pre-tax. That is, the dollars paying for these items don’t get taxed. If you’re in the 22% tax bracket, and you see $100 of pre-tax deductions on your pay stub, that lowers your tax liability by $22, so the effective cost to you is $78 after federal taxes. Some examples of pre-tax deductions are below:

  • Pre-tax Retirement Contributions

  • Premiums for Health, Vision, and Dental Insurance

  • HSA Contributions

  • These are special, because they not only lower your normal income taxes, but also the 7.65% FICA taxes when made through payroll!


After-tax Deductions

Some items you pay for through your paycheck don’t allow for tax deductions. That means that if you see $100 of after-tax deductions on your paycheck, it truly is $100. No tax savings here. Some examples are below:

  • Roth Retirement Contributions

  • Premiums for Life or Disability Insurance


Conclusion

It’s good to be aware of all of your expenses, starting with the ones you don’t see come out of your bank account. Review your pay stub to see if you should be adjusting tax withholding, your retirement savings contributions, or any of the insurance you pay for directly through payroll.

 

As always, keep in mind that you don't have to go it alone. Check out my website to see what it's like to work with me and reach out if you have any questions.


If you found this post helpful, help spread the word! But remember, this is solely for educational purposes - it's not advice.

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