Payroll Glossary

40+ common U.S. payroll and paycheck terms, in plain English. Skim the list or search with Ctrl/⌘+F.

Gross pay: Total earnings before any taxes or deductions are withheld.
Net pay: The amount actually deposited to your account after taxes and deductions — also called 'take-home pay'.
FICA: The Federal Insurance Contributions Act, covering Social Security (6.2%) and Medicare (1.45%) taxes on wages.
Social Security tax: 6.2% federal payroll tax on wages up to a $184,500 wage base (2026). Funds retirement, disability, and survivor benefits.
Medicare tax: 1.45% federal payroll tax on all wages, plus 0.9% Additional Medicare on wages over $200,000 (single).
FUTA: Federal Unemployment Tax Act — a 6% employer-only tax on the first $7,000 of each employee's wages, mostly offset by state UI credits.
SUTA: State Unemployment Tax — paid by employers to fund state unemployment benefits. Not withheld from employee paychecks.
Withholding: The portion of your wages your employer sends directly to the IRS and state on your behalf.
W-4: IRS Form W-4 — the certificate employees complete to tell employers how much federal income tax to withhold.
W-2: IRS Form W-2 — the year-end statement showing total wages, tax withheld, and pre-tax benefits.
1099-NEC: IRS form issued to independent contractors reporting non-employee compensation of $600 or more.
Pre-tax deduction: Money taken from gross pay before income taxes are calculated — reduces taxable wages (e.g., 401(k), health premiums).
Post-tax deduction: Money taken from net pay after taxes (e.g., Roth 401(k), garnishments, union dues).
401(k): Employer-sponsored retirement plan. Traditional contributions reduce current-year federal taxable income; Roth contributions don't but grow tax-free.
HSA: Health Savings Account for high-deductible health plans. Triple-tax-advantaged: pre-tax in, tax-free growth, tax-free withdrawals for medical expenses.
FSA: Flexible Spending Account — pre-tax dollars for medical or dependent-care expenses; 'use it or lose it' by plan year.
Section 125 plan: IRS section allowing employees to pay for certain benefits (health, dental, vision) with pre-tax dollars via a cafeteria plan.
Standard deduction: Flat federal deduction that reduces taxable income — $16,100 single / $30,000 joint / $22,500 head of household in 2026.
Itemized deductions: Alternative to standard deduction — listing specific deductible expenses like mortgage interest, SALT (capped), and charity.
Marginal tax rate: The tax rate on the last dollar you earn. Not your total tax rate.
Effective tax rate: Total tax divided by total income — always lower than the marginal rate in a progressive system.
Filing status: Your tax category: single, married filing jointly, married filing separately, head of household, or qualifying surviving spouse.
Head of household: Filing status for unmarried taxpayers who pay more than half the cost of keeping up a home for a qualifying person.
Exempt vs non-exempt: Non-exempt employees receive FLSA overtime for hours over 40/week; exempt employees typically do not.
FLSA: Fair Labor Standards Act — federal law setting minimum wage, overtime, and youth employment rules.
Overtime: Pay at 1.5x regular rate for hours over 40/week under federal FLSA. Some states require daily overtime too (e.g., California).
Pay period: The window of time you're being paid for — weekly, bi-weekly, semi-monthly, or monthly.
Pay frequency: How often you're paid. 26 bi-weekly checks vs 24 semi-monthly checks produce slightly different per-check math.
Wage base: The maximum earnings subject to a payroll tax. Social Security's is $184,500 in 2026; Medicare has none.
Additional Medicare Tax: Extra 0.9% Medicare withholding on wages over $200,000 (single) / $250,000 (joint).
Cafeteria plan: Another name for a Section 125 plan — lets employees choose from a menu of pre-tax benefits.
Imputed income: Non-cash benefits (e.g., group-term life > $50k) that are taxable and added to your W-2 wages.
Garnishment: Court-ordered withholding for child support, tax debts, or private judgments.
Local wage tax: Municipal or county income tax withheld on top of state tax. Common in Ohio, Pennsylvania, Kentucky, Maryland, and NYC.
Reciprocity: Agreement between two states that lets a resident of one work in the other without owing tax to the work state.
State disability insurance (SDI): Employee-paid payroll tax in a few states (CA, HI, NJ, NY, RI) funding short-term disability benefits.
Paid Family Leave (PFL): Employee-paid payroll contributions in states like NY, NJ, CA, and WA that fund paid family leave benefits.
Bonus tax rate: The IRS supplemental wage rate — 22% for bonuses under $1M, 37% above. It's a withholding rate, not a final tax rate.
Tip credit: In some states, tipped workers can be paid a lower cash minimum wage as long as tips bring them to the full minimum.
Take-home pay: See 'Net pay' — what actually reaches your bank account.