Every paycheck that you get oftentimes comes with pay stub. This is basically a piece of paper stating the amount of money you’ve earned for a given period and at the same time, the amount that was 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 vitally important that you know the amount withheld and the reason why.
As you read this article, we are going to tackle some deductions that are seen in paystubs which will help a lot in understanding their purpose. If you are interested in today’s subject, then I suggest that you keep on reading.
Number 1. Med Tax – you may wonder why you’re not able to receive the amount you are expected to get when you were initially given a job offer. Well, FICA or Federal Insurance Contribution Act has share in your pay. This is actually a federal payroll that is making deductions 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 – as long as you’re employed, you are obliged 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 – you will notice that there’s a column in your paystub saying state taxable wages. If there is an amount specified, you will find it in this column which also 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 – in addition to Social Security and Medicare paystub deductions, the federal government is taking its fair share. On the other hand, the amount will vary depending on your tax rate and allowances. 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) – in state of California, the workers are often subject to this deduction. Say for example that you’re covered by SDI, you’ll be able to benefit from Disability Insurance and Paid Family Leave.