Earnings: Gross Pay and How It's Built
The earnings section lists every component of what you made this period before any deductions. Gross pay is the total of all of these.
Regular Pay
For salaried workers, this is your annual salary divided by the number of pay periods. For hourly workers, it's your regular rate × hours worked (up to 40/week). Verify the hours match your own records every period.
Overtime Pay
Hours over 40 in a workweek must be paid at 1.5× your regular rate under the federal Fair Labor Standards Act (NC follows federal overtime rules). If you worked overtime and it doesn't appear as a separate line, that's an error. See our NC Overtime Calculator to verify the amount.
Supplemental Pay
Bonuses, commissions, shift differentials, holiday pay, and vacation payouts appear here as separate line items. Bonuses are taxed as ordinary income — they're not subject to a separate "bonus tax rate," but because payroll systems often withhold at a flat 22% federal rate for supplemental wages, you may see higher withholding on a bonus check than on a regular paycheck.
Pre-Tax Deductions: What Reduces Your Taxable Income
Pre-tax deductions come out of gross pay before federal and NC state income taxes are calculated, reducing the income you're taxed on. They do not reduce FICA (Social Security and Medicare) taxes.
| Deduction |
2025 Limit |
| 401(k) / 403(b) contribution | $23,500 (under 50) |
| Health insurance premium (employer plan) | No IRS cap |
| Health Savings Account (HSA) | $4,300 individual / $8,550 family |
| Healthcare FSA | $3,200 |
| Dependent care FSA | $5,000 |
| Dental / vision premium | No IRS cap |
Every dollar here reduces both your federal and NC state taxable income. At NC's 4.25% rate plus a 22% federal rate, each $1,000 in pre-tax deductions saves you approximately $262 in taxes.
Taxes: Federal, NC State, and FICA
This is typically the largest section of deductions and the one most people want to understand.
Federal Income Tax
Withheld based on your W-4 and the IRS withholding tables. The amount depends on your filing status, income, and any adjustments you claimed on Form W-4. Federal tax uses progressive brackets — you pay 10% on the first portion of income, 12% on the next, and so on. Your marginal rate doesn't apply to all your income, only the top slice. If the amount withheld looks too high or low, update your W-4.
North Carolina State Income Tax
NC withholds at a flat 4.25% for 2025 (dropping to 3.99% for 2026). This is calculated on your taxable wages after pre-tax deductions. There's no progressive bracket — every NC worker pays the same rate. The NC standard deduction ($12,750 single / $25,500 married) is accounted for through the NC-4 withholding form, not per-paycheck.
Social Security (6.2%) and Medicare (1.45%)
These are FICA taxes — mandatory federal payroll taxes that don't vary by state. Social Security applies to wages up to $176,100 in 2025; once you hit that cap, it stops for the rest of the year. Medicare has no wage cap. High earners (over $200,000) owe an additional 0.9% Medicare surtax, which is withheld starting in the pay period you cross $200,000. These are not affected by your pre-tax deductions or W-4 elections.
Post-Tax Deductions and Net Pay
Post-tax deductions come out after taxes are calculated, so they don't reduce your tax bill — but they do reduce your final take-home:
- Roth 401(k) contributions — you've already paid tax on these; withdrawals in retirement are tax-free
- Wage garnishments — court-ordered deductions for child support, student loans, or tax debts
- Union dues — if applicable
- Life insurance over $50,000 — the imputed value of employer-provided life insurance above $50k is taxable
- Charitable contributions — workplace giving programs
Net pay = Gross Pay − Pre-Tax Deductions − All Taxes − Post-Tax Deductions. This is what hits your bank account. Use our NC Net Pay Calculator to verify your expected take-home before your check arrives.
Year-to-Date Totals: Why They Matter
Every line on your pay stub has a YTD (year-to-date) column showing the running total since January 1. These matter for several reasons:
- Social Security cap tracking — once your YTD wages hit $176,100 (2025), Social Security withholding stops. You should see it disappear from your check mid-year if you earn above that threshold.
- 401(k) contribution limits — your YTD retirement contributions should not exceed $23,500 (under 50) or $31,000 (50+). If you're close to the limit late in the year, verify your employer will stop contributions automatically.
- Tax reconciliation — the YTD federal and state tax withheld should roughly match your expected annual tax liability. A large discrepancy means you may owe a big bill or be over-withholding. Compare against your last year's return to calibrate.
- W-2 verification — when your W-2 arrives in January, the YTD figures on your last pay stub of the year should match Box 1 (federal wages) and Box 16 (NC wages).
How to Catch Errors on Your Pay Stub
Payroll errors happen. Here's what to check every pay period:
Hours and Rate
If you're hourly, compare the hours on your stub to your own time records or timekeeping system. Verify the pay rate matches your current rate — especially after a raise takes effect. A common error is a raise being applied one pay period late.
Missing or Double Deductions
If you enrolled in benefits (health insurance, 401k, HSA) and they don't appear, you may not be enrolled. If a deduction appears twice, contact payroll immediately — duplicate deductions are recoverable but require a correction.
NC State Tax Withheld
A quick sanity check: multiply your taxable wages (after pre-tax deductions) by 4.25%. The result should be close to what appears as NC withholding per period. If it's dramatically different, check whether your NC-4 has an unusual additional withholding amount, or contact HR.
Math
Gross pay − all deductions should equal net pay. Software rarely makes math errors, but verifying periodically is worth the 30 seconds, especially after a pay change or new benefit election. North Carolina employers are required by the NC Department of Labor to provide an itemized pay stub — if anything is missing or unclear, you have the right to request clarification.
Frequently Asked Questions
Why is my first paycheck smaller than expected?
Several things hit harder in the first paycheck: benefit premiums that started mid-month may catch up, and if your first check covers a partial pay period, the gross is lower but some deductions (like insurance) may be full amounts. Also verify your W-4 was submitted — without it, employers are required to withhold at the highest single rate.
Why did my NC state tax withholding change when I didn't change anything?
NC updates its withholding tables annually as the tax rate changes. The rate dropped from 4.5% to 4.25% in 2025 and will drop again to 3.99% for 2026. If your withholding decreased slightly at the start of a new year, this is likely the reason — not an error.
What should I do if I find an error?
Report it to your HR or payroll department in writing (email is fine) as soon as you find it. NC law requires employers to correct payroll errors, and most can issue an off-cycle correction check or adjust the next pay period. Keep a copy of the pay stub showing the error.
