Reading a pay stub in detail is a useful exercise for anyone in HR or payroll, because the deduction section is where most employee questions start. A worker's gross pay was $3,000 for the period, but the check they took home was $2,120. Where did the other $880 go? The answer is deductions, and the right categorization matters for tax compliance, garnishment enforcement, and the occasional payroll correction. For HR teams, understanding the deduction stack makes employee questions much easier to answer in real time.
Mandatory Deductions and Why They Come First Mandatory deductions are required by law and can't be refused by the employee. Federal income tax withholding is the largest for most workers, calculated based on the W-4 on file and IRS withholding tables. FICA covers Social Security (6.2% of wages up to the 2026 wage base of $184,500) and Medicare (1.45% on all wages, plus an additional 0.9% on wages over $200,000 for single filers). State income tax varies by state; eight states have no state income tax, while others run up to 13.3% (California) for top earners.
Court-ordered garnishments (child support, tax levies, bankruptcy orders) are also mandatory and take priority over most voluntary deductions. The CCPA (Consumer Credit Protection Act) limits how much of disposable earnings can be garnished: 25% for most debts, up to 50-65% for child support depending on circumstances.
Voluntary Deductions and Tax Treatment Voluntary deductions split into pre-tax and post-tax categories. Pre-tax deductions reduce taxable income: 401(k) and 403(b) traditional contributions, HSA contributions, health insurance premiums paid through a Section 125 plan, and FSA contributions. Post-tax deductions come out after tax has been calculated: Roth 401(k), union dues, garnishments not ordered through IRS, and disability insurance purchased with after-tax dollars.
Pre-tax deductions generally save employees the combined marginal federal, state, and FICA rate, which can total 25 to 35% for middle-income workers. That tax savings is why benefits enrollment periods emphasize the pre-tax structure.
The Correct Order of Deductions Deduction order affects the math. The standard payroll sequence: pre-tax 401(k) contributions, then pre-tax health premiums and HSA, then mandatory tax withholding (federal, state, FICA), then garnishments, then post-tax deductions (Roth contributions, union dues, post-tax insurance). Changing the order can affect the garnishment calculation base, the FICA wage base, and the federal income tax calculation, all of which produce errors the IRS will catch during reconciliation.
What's the Difference Between Pre-Tax and Post-Tax HSA Contributions? HSA contributions made through payroll deduction are typically pre-tax and also exempt from FICA. HSA contributions made directly by the employee (outside payroll) are deductible on the federal return but still subject to FICA. For employees with a choice, payroll deduction is almost always the better tax outcome.
Building an Employee Deductions Process That Scales A well-run deductions process handles three things correctly. First, accurate setup at enrollment: all elections loaded to payroll with the right effective dates and the right tax treatment. Second, clean change management for mid-year life events that trigger deduction updates (new spouse, new dependent, updated beneficiary). Third, year-end reconciliation across W-2 Box 1, Box 12, and Box 14 to confirm that reported deductions match the payroll records.
For related payroll concepts, see net pay , payroll , and earnings . The IRS publishes authoritative guidance on employee withholding in Publication 15 (Circular E) at irs.gov/publications/p15 .
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