Your First US Paycheck Explained Line by Line: Federal, FICA, State, 401(k) — and Why "Net" Is Smaller Than You Think
A $6,250 monthly gross becomes $4,400 in the bank. Every line on an American pay stub decoded, the W-4 choices that change withholding, and the two boxes (401k match, HSA) that are free money most new hires leave unticked.
You negotiated $75,000. Your first pay stub says $6,250 gross and $4,412 net, and there are eleven lines in between with acronyms nobody explained. Here is each one, in the order it appears, using a single filer in a state with income tax (we'll use a 5% flat rate) who enrolled in the company 401(k) at 6%.
The stub
| Line | Amount | What it is |
|---|---|---|
| Gross pay | $6,250.00 | $75,000 ÷ 12. Salaried employees are usually paid semi-monthly ($3,125 × 24) or biweekly ($2,884.62 × 26) — check which, it changes every number below. |
| 401(k) pre-tax | −$375.00 | 6% of gross into your retirement account. Reduces taxable income for federal and most state tax, not for FICA. |
| Medical premium (pre-tax) | −$180.00 | Your share of employer health insurance. Also pre-tax under a Section 125 plan. |
| Federal income tax | −$591.00 | Withheld per your W-4. Estimate: (75,000 − 4,500 − 2,160 − 15,000 std. deduction) = $53,340 taxable → ~$7,090/yr → $591/mo. |
| Social Security (OASDI) | −$387.50 | 6.2% of gross (401k does not reduce it), up to the $176,100 wage base. |
| Medicare | −$90.63 | 1.45% of gross, no cap (+0.9% above $200k). |
| State income tax | −$215.00 | Varies 0–13.3%. Nine states have none. |
| State disability / paid leave | −$0–60 | CA SDI 1.2%, NY, NJ, WA, MA, CO and others have small programs. |
| Net pay | $4,410.87 | 70.6% of gross. Without the 401(k) and medical lines it would be ~$4,800 — but you would own no retirement savings and no insurance. |
The line that isn't there: the employer's side
Your employer separately pays another 7.65% FICA on your wages, federal and state unemployment insurance, and the larger part of your health premium (typically $500–700/month for single coverage). Total cost of employing you: roughly $90,000. This matters when comparing an offer to contract work — a 1099 contractor at $75,000 is materially poorer than a W-2 employee at $75,000.
Two free-money boxes new hires leave unticked
1. The 401(k) match
A common match is "100% of the first 3%, 50% of the next 2%". Contributing 5% ($312/month) captures $250/month from the employer — an instant 80% return before any market gain. Contributing 0% forfeits $3,000 a year. Vesting schedules (often 3–4 years) determine when the match becomes fully yours.
2. The HSA
If you chose a high-deductible health plan, you can fund a Health Savings Account: triple tax-advantaged (pre-tax in, tax-free growth, tax-free out for medical). 2025 limit $4,300 single. Many employers seed it with $500–1,000.
Your W-4 decides the refund — or the bill
The 2020+ W-4 has no "allowances". Single with one job and no dependents: sign it and leave Step 2–4 blank; withholding will be close to correct. Two jobs or a working spouse: use the IRS estimator or tick Step 2(c), or you will owe in April. A big refund is not a bonus; it is an interest-free loan you gave the Treasury.
Semi-monthly vs biweekly: the "extra paycheck" months
Biweekly pay produces 26 checks — two months a year have three paydays. Budget on 24 and treat the extra two as windfalls for the emergency fund. Semi-monthly pay is always the 15th and last day; simpler for rent, slightly larger per check.
Quick estimator
Net ≈ Gross − 401k% − medical
− Federal (use brackets on gross − 401k − medical − $15,000)
− 7.65% of gross (FICA)
− State rate × (gross − 401k − medical)For a $75,000 salary this lands within $50 of the stub above in most no-city-tax locations. New York City, Philadelphia and a few others add a local income tax of 1.5–4%.
Next in this series: a UK payslip line by line — PAYE, National Insurance, pension auto-enrolment and the student-loan line.
The salary calculator gives a fast net-pay estimate for the US and 25 other countries — useful before you sign.
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