Common paycheck deductions
If you have recently graduated from high school or college and are on your way into the workforce, you've got a lot of important decisions to make — including figuring out your health benefits options — to keep you feeling and looking your best. allaboutthebenefits.com gives you the information you need to make better health benefits choices.
Every pay period, money is taken out of your check for taxes and other deductions based on your authorized selections. Here is a list of common paycheck deductions:
- Income tax withholding: Money is withheld for federal, and often state, income taxes. Federal income tax is often the largest deduction from your paycheck.
- Federal Insurance Contributions Act (FICA) tax: This tax pays for Social Security (the program that pays your retirement benefits) and Medicare. You'll pay 7.65 percent of your income into FICA and your employer pays the other half.
- Other taxes: Some states charge additional taxes to cover state disability insurance and/or unemployment benefits. Usually, these are a percentage of your gross pay, and maximum limits often apply.
- Health Benefits: Even though health benefit premiums are deducted from your paycheck, it is almost always cheaper to go through your employer than trying to find health, vision or dental insurance on your own.
- Retirement Savings Plan: Or more commonly known as your 401(k). Remember, even putting a little bit of money toward your 401(k) can lead to big savings once you hit retirement age.
- Life Insurance: Employers often pay the premiums for a minimum amount of coverage, but workers may contribute to the cost, as well.
- Disability Insurance: This coverage replaces lost income if the worker is disabled due to an accident or an extended illness and is a great benefit if the employer offers it.
