Every pay check that you get usually comes with a paystub. Basically, this is a piece of paper which states the amount of money that you have earned for a certain time and also, the amount that’s deducted for insurance and taxes. It is pretty normal to see the paystub to come in codes for both deductions and earnings. For some people, it may be a challenge to understand the deductions on paystub. It is essential for you to know what amount is withheld and why.
In this article, we will be covering some of the usual deductions present in paystubs to assist you know what they exactly mean. I encourage that you read the next paragraphs if you would like to learn more about this subject.
Number 1. Med Tax – you might be wondering why you are not getting the expected amount when you were given a job offer. Well, FICA or Federal Insurance Contribution Act has share in your pay. Basically, this is a form of federal payroll that automatically deducts from your salary to contribute to the Medicare program. These deductions are designed to run the program for people who are aged 65 years old and above.
Number 2. SS Tax – so long as you are employed, you will be obligated to make contributions to Social Security program. This type of program provides support to all eligible beneficiaries particularly to those who are running candidate for retirement and disabled. Unless you are not any of the two, you will be able to claim your SS benefits as soon as you reach retirement age.
Number 3. State Tax – you will notice that there’s a column in your paystub saying state taxable wages. If there’s a specified amount you found in this column, then it only means that your state is allowing state taxes. It will be left blank however if your state isn’t allowing state income tax. Few of the states that levy income tax are Alaska, Florida, Washington, Nevada and Texas.
Number 4. Federal Tax – the federal government takes its fair share of deductions too on top of your Social Security and Medicare paystub deductions. But depending on your tax rate and allowances, the amount is going to be variable. Aside from that, it will depend on your retirement contributions and your pre-tax expenses on health insurance as well as other benefits.
Number 5. State Disability Insurance (SDI) – this deduction is very common among workers in the state of California. In case that you are covered by SDI, then you’ll have the privilege to have coverage from Disability Insurance and Paid Family Leave.