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. Normally, the paystub is available with codes for both deductions and earnings. Normally, the deductions on paystub are something that many people aren’t able to understand. It is very important that you know what amount is being 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. 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 – so long as you are employed, you will be obligated to make contributions to Social Security program. This program is providing support to all the eligible beneficiaries most especially those who are candidate for retirement and disabled. You can claim your SS benefits only when you hit your retirement age.
Number 3. State Tax – if you will look at your paystub, you are going to notice the column for state taxable wages. If there is an amount specified, you are going to find it in this column and if you do, it means that your state allows 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. On the other hand, the amount will vary depending on your tax rate and allowances. However, this will also depend onto your retirement contributions and at the same time, 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. Say for example that you’re covered by SDI, you’ll be able to benefit from Disability Insurance and Paid Family Leave.