You may remember your very first paycheck. Likely, it was for less pay than you expected, because you didn't count on the deductions. Just what deductions can your employer take out of your paycheck? Here's a quick guide.
Taxes, Medicare, and Social Security Paycheck Deductions
Technically, taxes, Medicare, and social security are withholdings, not deductions, but the effect is the same: it’s the money taken out of your gross pay.
Social security withholdings are 6.2% withheld from your paycheck, and your employer pays an additional 6.2%. Once you've earned $132,900 in a calendar year, you will no longer have social security taxes withheld. Medicare takes an additional 1.45 % from both you and your employer. You pay into Medicare on all your salary, with the percent increasing an additional 0.9% when you hit $200,000 in salary.
You may hear about two deductions that are called FICA, which stands for the Federal Insurance Contributions Act. This term refers to the law which allows for social security and Medicare withholding.
Federal Tax Is a Paycheck Deduction
Federal tax withholdings vary from person to person, based on your income level and how many allowances you declare on your W4 form. For instance, if you are single with no children, you'll probably want to claim fewer allowances than you would if you had a spouse and six children.
State and Local Taxes Are Paycheck Deductions
Most states, but not all, have state income taxes. Your employer withholds these taxes from your paycheck. Some cities and counties require withholding taxes as well. Because each state and municipality has its own laws regarding taxes, this will vary from jurisdiction to jurisdiction. Some places use a flat income tax, and others adjust the amount of tax due to income and allowances.
If you're unsure, ask your payroll department or your accountant. If your employer withheld too much money, you'll receive a refund when you file your taxes. If your withholding level were not high enough, you'll have to pay additional money to the government at tax time. If you have to pay additional taxes at tax time, you’ll want to adjust your withholdings with your employer.
Court Orders Create a Paycheck Deduction
The above withholdings are for everyone, but some people have additional paycheck deductions. If you owe child support, alimony, back taxes, or unpaid and overdue debts, you could face a court order to deduct that money from your paycheck directly. If your employer receives a court order, they must deduct that money from your paycheck, and you would have to go to court to change it.
States differ on how much of your salary an employer can deduct due to court orders. You shouldn't get a $0 paycheck, regardless of the legal obligations you face.
Benefits Are Often a Paycheck Deduction
If you pay a portion of your company-provided health insurance, you'll see that as a deduction on your paycheck. If you participate in a 401k or other retirement plan, that deduction will show up as well. Any health savings accounts, flexible spending accounts, or additional savings will also come out of your paycheck.
You may be able to adjust the amount of these deductions, depending on the formal plan. For healthcare-related deductions, those can only change if you have a qualifying “life event" or during open enrollment. But, you may be able to adjust your retirement contributions throughout the year.
Uniforms, Breakages, and Dine-and-Dash as a Paycheck Deduction
If your company requires you to wear a uniform, they can deduct the cost of the uniform and any maintenance costs (such as company-provided dry cleaning) from your paycheck—as long as it doesn't bring your paycheck below minimum wage.
If you break workplace equipment or have a customer who dines-and-dashes, your employer can deduct the cost of that equipment from your pay under the following conditions:
- You are a non-exempt employee; Salaried exempt employees will lose their exemption if their employer docks their pay for this reason
- The deduction won't bring your pay below the minimum wage
- Your employer is not taking a tip credit
Generally, employers should consider these things a cost of doing business, and not punish their employees. However, if the employer can demonstrate that you behaved recklessly, they are more likely to take a paycheck deduction.
Deductions and withholdings can make your paycheck seem smaller than it should be, but they are part of how you’re paid in any job. If you have concerns about deductions you can speak to your payroll office or call your local department of labor. They can help walk you through your paycheck deductions and tell you why the deductions are as they are.
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment laws and regulations vary from state to state and country to country. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.