Every paycheck that you get oftentimes comes with pay stub. 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. The paystub usually is available with 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. If you want to learn more about it, then I encourage you to keep on reading.
Number 1. Med Tax – you might be wondering why you are not getting the expected amount when you were given a job offer. This is due to the reason that part of your pay goes to FICA or Federal Insurance Contribution Act. Actually, this is a federal payroll that makes deductions from your salary to be able to make contributions 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 – from the time being that you’re enrolled, you will be required to contribute to Social Security program. In this program, it is supporting all eligible beneficiaries most especially the ones who are disabled or candidate for retirement. You may claim your SS benefits once you hit your 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 is going to be left blank in the event that your state is not allowing state income tax. Few of the states that levy income tax are Alaska, Florida, Washington, Nevada and Texas.
Number 4. Federal Tax – aside from your Social Security and Medicare paystub deductions, federal government takes its fair share too. But depending on your tax rate and allowances, the amount is going to be variable. In addition to that, it depends as well on your retirement contributions as well as 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.