Understanding your Texas paycheck: Every deduction explained and what to watch for

Most people have never actually read their pay stub. Here's what every line means and where DFW workers commonly lose money.

Federal deductions (required):

1. Federal Income Tax: Withheld based on your W-4 elections. If you get a huge refund every year (over $1,000), you're over-withholding — the IRS is holding your money interest-free. Adjust your W-4.

2. Social Security (FICA): 6.2% of your gross pay, up to the wage base ($176,100 in 2026). Your employer matches 6.2%. Source: SSA.gov.

3. Medicare: 1.45% of all gross pay. No cap. Additional 0.9% on earnings over $200,000 (single filers). Source: IRS.

Texas-specific:

• No state income tax deduction. This is the big one. Your paycheck should NOT have any state withholding line.
• If you see "state tax" on a Texas paycheck, something is wrong. Either you're being taxed by another state (possible if remote) or there's an error.

Common voluntary deductions:

• 401(k)/403(b): Pre-tax retirement contributions. Reduces your taxable income. Max: $23,500 (2026). If your employer matches, contribute at LEAST enough to get the full match — it's literally free money.
• Health insurance premiums: Usually pre-tax through your employer (Section 125 cafeteria plan). Check if you're paying pre-tax or post-tax.
• HSA contributions: If you have a high-deductible health plan. Triple tax advantage: deductible going in, grows tax-free, withdrawn tax-free for medical expenses. Max: $4,300 individual, $8,550 family (2026).
• FSA (Flexible Spending Account): Use-it-or-lose-it. $3,200 max (2026). Good for predictable expenses only.

What to watch for:

1. Incorrect W-4 withholding. Use the IRS Withholding Estimator (irs.gov/individuals/tax-withholding-estimator) to check.
2. Employer not contributing their 401(k) match. Verify on your 401(k) statement. Failure to deposit matching contributions timely is a DOL violation.
3. Deductions you didn't authorize. Under Texas Labor Code 61.018, your employer cannot deduct from your paycheck without written authorization.
4. Overtime calculation errors. Overtime must be calculated on your REGULAR rate, which includes commissions, shift differentials, and non-discretionary bonuses.

Sources:

• IRS — W-4 withholding estimator (irs.gov)
• Social Security Administration — FICA rates (ssa.gov)
• Texas Labor Code 61.018 (unauthorized deductions)
• IRS — 401(k) and HSA contribution limits
• FLSA — overtime calculation rules (29 CFR 778)

Read your pay stub. Every line. Every pay period. Errors compound.