Paycheck Deductions, Do you Understand them?


Breaking Down Your Paycheck Deductions

Understanding your paycheck deductions is important because it’s your hard earn money! That is why we will discuss the main paycheck deductions that need to go on every paycheck for Federal and for the state of California.

The Federal Deductions include:

  1. Federal Medicare. – Federal Medicare is 1.45% of your total gross. In the sample above 1.45% of $2500 is $36.25. There is no wage limit for this deduction.
  2. Social Security. – Social Security is 6.2% of your total gross. In the sample above 6.2% of $2500 is $155. There is a wage limit for this deduction. For 2018 it is $128,400. Any wages above this amount you will no longer get this deduction from your paycheck. Medicare and Social Security are also sometimes called FICA.
  3. Federal Withholding. – This deduction is based on the number of allowances from the W4 you fill out for your employer. Another name for allowances is dependents.
  4. State Withholding. – The state withholding is also based on the number of allowances from your W4. However, you can have different allowance withholding from your federal by requesting a DE4 from your employer. Withhold too little throughout the year you can have a tax bill waiting for you when you file your tax return. 
  5. SDI. – In the state of California there is a deduction for State Disability Insurance. This paycheck deduction is 1% of your total gross wages. In different states there may be unemployment or disability deductions similar to this. You may check with your employer to learn more.

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