Understanding Your Paycheck — slides
Financial Literacy Club
Money After High School · Lesson 1
Understanding Your Paycheck
Gross vs. net pay, pay stubs, and the W-4.
12-minute lesson · learnwithflc.org
Understanding Your Paycheck · 1 / 19
Financial Literacy Club
Money After High School · Lesson 1
Understanding Your Paycheck
Gross vs. net pay, pay stubs, and the W-4.
12-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Distinguish gross pay from net (take-home) pay
- Calculate Social Security and Medicare withholding
- Read a pay stub and explain what the W-4 does
Warm-up
You work 20 hours at $15 an hour. How much will your paycheck be? Guess before we calculate.
Think, then write your answer.
The big idea
Understanding Your Paycheck
Gross vs. net pay, pay stubs, and the W-4.
Money After High School · Lesson 1
Your gross pay is what you earned: hours × hourly rate, or your salary for the period. Your net pay (take-home pay) is what actually lands in your account after deductions.
Money After High School · Lesson 1
- Social Security: 6.2% of your pay.
- Medicare: 1.45% of your pay. Together with Social Security, these are called FICA taxes.
- Federal income tax withholding: an estimate of your income tax, based on your pay and the W-4 form you fill out when you're hired.
- State income tax: depends on the state. Texas has none; many states do.
- Benefits: health insurance premiums or retirement contributions, if you sign up.
Vocabulary
W-4
A form you give your employer that tells them how much federal income tax to withhold from each paycheck.
Money After High School · Lesson 1
Your pay stub shows each deduction, plus year-to-date (YTD) totals. Check it — mistakes happen, and it's your money.
Pay frequency matters for budgeting: biweekly (every two weeks) means 26 paychecks a year; semimonthly (twice a month) means 24.
See it
Gross pay of $520.00, minus Social Security of $32.24, Medicare of $7.54, and federal income tax withholding of $26.00, leaves net pay of $454.22. No state income tax in Texas.
- Gross pay
- $520
- Social Security (6.2%)
- −$32
- Medicare (1.45%)
- −$8
- Federal income tax withheld (5% estimate)
- −$26
- State income tax (Texas)
- $0
- Net pay87% of gross
- $454
Real example
Jordan's first paycheck surprise
Jordan works 40 hours at $13 an hour and expects $520. The deposit is about $454.
Nothing went wrong. FICA taxes and income tax withholding came out first. From now on, Jordan budgets from net pay — and checks each pay stub to make sure the hours and rate are right.
Try it together
Try it: paycheck calculator
Put in your own hourly pay and hours to see what you'd actually take home.
Your numbers
Varies by income and your W-4. Check a real pay stub for yours.
Texas has no state income tax. Other states do.
Results
Gross pay
$520.00
40 hours × $13.00
Take-home (net) pay
$454.22
87% of gross
| Gross pay | $520.00 |
|---|---|
| Social Security (6.2%) | −$32.24 |
| Medicare (1.45%) | −$7.54 |
| Federal income tax (5%) | −$26.00 |
| State income tax (0%) | $0.00 |
| Retirement (0%) | $0.00 |
| Net pay | $454.22 |
Social Security and Medicare (together called FICA) are set by law. Income tax withholding is an estimate — your actual tax is settled when you file a return.
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · pairs · 10 min
Stub Detective
- Post a made-up pay stub: 40 hours at $14 an hour, federal income tax withheld $38, no state income tax.
- Pairs calculate gross pay, Social Security (6.2%), Medicare (1.45%), and net pay.
- Pairs find what percent of gross pay they actually took home.
- Discuss: what would change if they adjusted their W-4?
Check for understanding · 1 of 3
You receive your first paycheck and notice the amount deposited is lower than your gross pay.
Why?
- AThe bank charged a deposit fee.
- BTaxes like Social Security, Medicare, and income tax withholding were taken out first.
- CYour employer made a mistake.
- DFirst paychecks are always half.
B. Taxes like Social Security, Medicare, and income tax withholding were taken out first.
Deductions come out before you're paid. What's left is your net pay.
Check for understanding · 2 of 3
You're paid biweekly.
How many paychecks will you get in a year?
- A12
- B24
- C26
- D52
C. 26
Every two weeks = 52 ÷ 2 = 26 paychecks. (Twice a month would be 24.)
Check for understanding · 3 of 3
The W-4 form tells your employer how much federal income tax to withhold from your pay.
- True
- False
True
Fill it out carefully when you're hired, and update it if your situation changes.
Remember
Key takeaways
- Gross = earned. Net = take-home.
- FICA = Social Security 6.2% + Medicare 1.45%.
- The W-4 sets your federal withholding.
- Biweekly = 26 paychecks; semimonthly = 24.
- Check your pay stub.
Discuss
Talk it over
- What would you do if your paycheck showed fewer hours than you worked?
- Why do you think taxes are taken out of each paycheck instead of paid once a year?
Exit ticket
What's the difference between gross pay and net pay?
Answer on your exit ticket before you leave.
Nice work today.
Review this lesson anytime — free, no account needed:
learnwithflc.org/courses/money-after-high-school/paychecks
Next up: finish your worksheet.