How to use this glossary
Every term on your pay stub or W-4, defined in plain English. Jump to a letter, or see how the numbers work in our paycheck tax overview, decode your stub in what FICA EE and other stub codes mean and the paycheck calculator.
4
- 401(k)
- An employer-sponsored retirement plan. Traditional contributions come out before income tax; Roth contributions come out after tax.
- 403(b)
- A retirement plan similar to a 401(k) for public schools and many non-profits.
A
- Additional Medicare tax
- An extra 0.9% Medicare tax on wages above $200,000, withheld by employers.
- Adjusted gross income (AGI)
- Your total income minus certain adjustments, before the standard or itemized deduction.
- After-tax deduction
- A deduction taken from pay after taxes are calculated, such as Roth 401(k) contributions or garnishments.
- Aggregate method
- A way of withholding on bonuses by combining them with regular wages and calculating tax on the total.
B
- Biweekly
- Paid every two weeks โ 26 paychecks per year.
- Bracket (tax bracket)
- A range of taxable income taxed at one rate. Only income inside each range is taxed at that rate.
C
- Cafeteria plan (Section 125)
- An employer plan that lets you pay certain benefits, such as health premiums, with pre-tax dollars.
- Child tax credit
- A federal credit of up to $2,200 per qualifying child under 17.
- COLA
- Cost-of-living adjustment โ the annual increase in Social Security benefits, and the trigger for the new wage base.
D
- Deduction
- An amount subtracted from income before tax (or, on a stub, an amount taken from pay).
- Dependent
- A qualifying child or relative you support, which can lower withholding and tax.
- Direct deposit
- Pay sent electronically to a bank account instead of by paper check.
E
- Earned income
- Wages, salary, tips and net self-employment income.
- Effective tax rate
- Total tax divided by total income โ your average rate.
- Employer match
- Money an employer adds to your 401(k) based on your contributions.
- Exempt employee
- An employee not entitled to overtime because of salary and job-duty tests.
- Extra withholding
- An additional flat amount you ask your employer to withhold, entered on Form W-4 Step 4(c).
F
- FICA
- Federal Insurance Contributions Act โ the Social Security and Medicare payroll taxes.
- FICA wages
- Wages subject to Social Security and Medicare, usually gross pay minus Section 125 benefits.
- Filing status
- Single, married filing jointly, married filing separately, or head of household โ determines your brackets and standard deduction.
- FLI
- Family Leave Insurance, such as New Jersey's employee-paid paid family leave program.
- Form W-2
- The annual wage and tax statement your employer sends you.
- Form W-4
- The form that tells your employer how much federal income tax to withhold.
- FSA
- Flexible spending account โ pre-tax money for health or dependent-care costs.
G
- Garnishment
- A court- or agency-ordered deduction from pay to pay debts such as child support or unpaid taxes.
- Gross pay
- Your total earnings before any deductions.
H
- Head of household
- A filing status for unmarried taxpayers who pay more than half the costs of a home for a qualifying person.
- HSA
- Health savings account โ a tax-advantaged account paired with a high-deductible health plan.
L
- Local income tax
- A city, county or school-district tax on wages, such as in New York City, Philadelphia, Ohio cities and Maryland counties.
M
- Marginal tax rate
- The tax rate on your next dollar of income.
- Medicare
- The federal health insurance program funded by a 1.45% payroll tax on wages (plus employer match).
N
- Net pay (take-home pay)
- What you receive after taxes and deductions.
- Non-exempt employee
- An employee entitled to minimum wage and overtime.
O
- OASDI
- Old-Age, Survivors and Disability Insurance โ the formal name for Social Security.
- Overtime
- Pay at 1.5 times the regular rate for non-exempt hours over 40 in a week.
P
- Pay frequency
- How often you are paid: weekly, biweekly, semi-monthly or monthly.
- Pay period
- The span of time covered by one paycheck.
- Percentage method
- The IRS method, in Publication 15-T, that payroll software uses to calculate federal withholding.
- PFML
- Paid Family and Medical Leave โ state programs funded by payroll premiums.
- Pre-tax deduction
- A deduction taken before income tax is calculated, lowering taxable wages.
- Progressive tax
- A tax where higher portions of income face higher rates.
R
- Reciprocity agreement
- An agreement letting residents of one state avoid tax in another state where they work.
- Roth 401(k)
- A 401(k) funded with after-tax dollars; qualified withdrawals are tax-free.
S
- SDI
- State Disability Insurance โ payroll-funded temporary disability coverage in several states.
- Semi-monthly
- Paid twice a month โ 24 paychecks per year.
- Social Security tax
- A 6.2% payroll tax on wages up to the annual wage base ($184,500 in 2026).
- Standard deduction
- A fixed amount subtracted from income before tax if you do not itemize.
- State income tax
- A tax on wages levied by 41 states and D.C. (nine states have none).
- Supplemental wages
- Bonuses, commissions and other pay outside regular wages, withheld under special rules.
T
- Tax credit
- A dollar-for-dollar reduction of tax owed, more valuable than a deduction of the same amount.
- Tax Withholding Estimator
- An IRS online tool that recommends W-4 entries.
- Taxable income
- Income after deductions โ the amount to which tax brackets apply.
- TDI
- Temporary Disability Insurance, the name of the programs in New Jersey, Rhode Island and Hawaii.
- Time-and-a-half
- Overtime pay at 1.5 times your regular hourly rate.
- Traditional 401(k)
- A 401(k) with pre-tax contributions; withdrawals are taxed as ordinary income.
U
- Unemployment insurance
- A state program funded mainly by employer taxes; a few states also charge employees.
W
- W-4P
- The withholding form for pensions and annuities.
- Wage base
- The maximum earnings subject to a payroll tax; the 2026 Social Security wage base is $184,500.
- Withholding
- Money your employer holds back from your pay and sends to tax authorities on your behalf.
Y
- YTD (year-to-date)
- Totals from January 1 through the current pay date, shown on your pay stub.
Frequently asked questions
What is the difference between gross pay and net pay?
Gross pay is your earnings before deductions; net pay is your take-home pay after taxes and deductions.
What is FICA on my pay stub?
FICA covers Social Security (6.2%) and Medicare (1.45%) payroll taxes withheld from your wages.
Try it with your numbers
More guides
How paycheck taxes work
Every deduction from gross to net pay, explained step by step with a worked example.
2026 federal tax brackets
Brackets for every filing status, standard deductions, Social Security and Medicare limits.
W-4 guide
Step-by-step help with each W-4 section, multiple jobs, dependents and extra withholding.
Pre-tax deductions
What each pre-tax benefit saves, 2026 limits, and where states differ from federal rules.
Overtime & taxes
Why overtime is not taxed at a higher rate, the new overtime deduction and state daily-overtime rules.
Bonus tax
The 22% flat rate, the aggregate method, the $1M rule and why withholding is not your final tax.
Try the paycheck calculator โ ยท Take-home pay by state โ
Sources
- IRS Publication 15 (2026) โ Employerโs Tax Guide
- IRS Publication 15-T (2026)
- U.S. Department of Labor โ Wage and Hour Division
Estimates for information only, not tax advice. See our disclaimer and editorial policy.