Level All Team
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June 5, 2026
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3 min
You’ve been told you’ll earn $15 an hour, worked 40 hours, and done the math: $600. Then you open your pay stub and see $487. If your first reaction was to think something had gone wrong, or to question why your paycheck is less than you expected, you’re not alone — it’s one of the most common surprises for people starting their first job. Nothing went wrong. This is just how paychecks work, and it’s worth understanding before you spend money you don’t have.
Gross pay is the total amount you earned before anything is taken out — the number your employer multiplied your hours by. Net pay is what actually lands in your bank account after all deductions. The difference between those two numbers is made up of taxes and, depending on your job, other withholdings like health insurance or retirement contributions. Net pay is your real income. Plan your budget around that number, not gross pay.
FICA stands for Federal Insurance Contributions Act. It’s two taxes combined: Social Security (6.2% of your gross wages) and Medicare (1.45%). Together, they take 7.65% of your paycheck automatically, regardless of how much you earn. Your employer matches this amount and sends the combined total to the government. FICA funds retirement and healthcare programs — yes, including the Social Security you may someday collect.
FICA is not optional and not refundable at tax time. It’s gone.
Federal income tax is the amount your employer withholds from each paycheck to pre-pay your estimated federal taxes for the year. How much is withheld depends on your income level and what you filled out on your W-4 form when you were hired.
Here’s the thing about this one: it’s an estimate. At the end of the year, when you file your tax return, the government calculates what you actually owe. If too much was withheld, you get a refund. If too little was withheld, you owe the difference. This is why filing your taxes matters even when you’re young and your income is modest.
If your income is low enough — under a certain threshold that depends on your filing status and age — you may owe little to no federal income tax. But you still have to file a return to find out, and to get any refund you’re owed.
Most states have their own income tax, which is also withheld from your paycheck. The rate varies by state — some states have flat rates, others have progressive rates that increase with income. A handful of states — including Florida, Texas, and Washington — have no state income tax at all. Your pay stub should show a separate line for state withholding if it applies to you.
Depending on your employer, you might also see deductions for:
Part-time and hourly workers at most retail, food service, or summer jobs often won’t see retirement or health deductions — those are more common with full-time salaried positions.
First: figure out your real take-home pay and plan around that number. A lot of people budget based on their hourly rate times their hours and then wonder why they’re coming up short.
Second: save your pay stubs. You’ll need them when you file your taxes, and if there’s ever an error in your paycheck, you’ll need documentation.
Third: understand that the money withheld for taxes isn’t a penalty — it’s a prepayment of an obligation that exists whether or not it’s withheld. The withholding system just makes sure you have the money when the government asks for it, rather than facing a large bill in April.
Why is my take-home pay lower than my hourly wage times my hours?
Because federal taxes, FICA (Social Security and Medicare), and potentially state taxes are withheld from every paycheck before you receive it. Depending on your income and location, these deductions typically take 15-25% of your gross earnings. Your take-home (net) pay is always lower than your gross pay.
Do I have to file taxes if I only worked a summer job?
Yes, if your income exceeded $14,600 as a single filer in 2025 (the standard deduction threshold), you’re required to file. Even if you earned less, filing is often worth it because you may have had too much withheld and are owed a refund. The IRS processes refunds only for returns that are filed.
What is a W-2, and when will I get one?
A W-2 is a tax form your employer sends you by January 31 of the following year. It shows your total earnings and all taxes withheld for the year. You need it to file your tax return. If you had more than one job, you’ll receive a W-2 from each employer.
Can I get the FICA taxes back when I file my return?
No. FICA taxes — Social Security and Medicare — are not refundable through your income tax return. They fund separate federal programs and are calculated separately from income tax. The only exception is if you had FICA withheld in error (for example, if you’re a student working on campus under a specific exemption).
Level All’s financial literacy resources cover budgeting, taxes, credit, and everything else you need to know about managing money as a student and young adult. Head to LevelAll.com for expert guidance on college, career, money, and life.
