What Are the Standard Payroll Deductions?
Your paycheck, whether you work hourly or on salary, always contains less money than what you are actually paid. This is because certain taxes are, by law, deducted from your pay before it reaches your pocket or bank account. These required deductions are called standard deductions, but you may have optional or elective deductions listed as well.
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Social Security
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The Social Security Act, signed in 1935 as part of former President Franklin D. Roosevelt's "New Deal," required payment of Social Security taxes directly from payroll. This provision was later renamed the Federal Income Contributions Act.
Medicare
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In 1965, Medicare was added to FICA under former President Lyndon B. Johnson's "Great Society." Most often, Social Security and Medicare are listed separately, but sometimes they are combined on a pay stub under the heading "FICA."
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Federal Income Tax
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The Current Tax Payment Act of 1943 requires that federal income taxes be paid in the year the income was earned. Since then, federal income tax withholding has been a standard deduction.
State Income Tax
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If you live in a state that does not have a state income tax, such as Florida or Texas, this payroll deduction does not apply to you. Otherwise, this deduction parallels the federal income tax withholding.
Unemployment Insurance
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This will either be state or federal unemployment insurance, but not both. Most state laws are written so they do not conflict with the federal program.
Contractual Deductions
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Other deductions may be mandated by local law or contract. Union dues are a common example of a contractual deduction.
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