What Are The 5 Mandatory Deductions From Your Paycheck?


Is there a better feeling than payday? Seeing your hard work quantified in a nice deposit into your bank at the end of the week, or the month, or whatever interval it is that you’re paid in. Some of us spend the whole time in between imagining what we’re going to buy as soon as the money comes in, or what our savings might look like after this check. Then sometimes we see the check and the figure on it is lower than expected. These deductions can be seen clearly on your pay stub. Our pay stub generator allows you to create pay stubs in a simple and easy-to-use manner. 

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I don’t know about you but I always forget to factor in the mandatory deduction when I’m budgeting how much I’m going to get paid. Sometimes understanding what these deductions are, or why we have to pay them can be a bit confusing at best; frustrating and unfair at worst. 

But don’t fret, within this article we will break down the mandatory deductions you’re likely to see on your paycheck and explain where that money goes instead of your bank account. With this information, hopefully, your next paycheck will make a bit more sense, and seeing those deductions will hurt just a little less.

Also read: What Is FUTA Tax - All You Need To Know

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What is a Mandatory Deduction? 

Not to sound condescending, but a mandatory deduction is a deduction taken off your paycheck that is mandatory, meaning that you don’t get a choice as to whether you pay it or not. These will be taken off of your paycheck automatically without any interference from you, in fact, your employer is required by law to withhold these funds from you as dictated by Federal or State laws. There are some deductions that you can authorize, but your employer needs written confirmation that you agree to pay these - we’ll cover those a little later on. 

There are several different types of mandatory deduction, depending on you and your situation, but the 5 that you’re most likely to come across look like this: 


Federal Income Tax

The amount that you pay in federal income taxes is dependent on the amount of money that you make during a financial year. The brackets for this are ever-changing, however, the concept is the same - the more you earn, the more you pay. These brackets make it easy enough to see how much you should be paying each year/paycheck, and you can go online and check a calculator if necessary, as there are plenty of them. 

These taxes are used for public services and, if used appropriately and effectively, should make life better. Institutions such as public transportation, public schools, and the military are all beneficiaries of income tax.

Also read: How to Review Your Paychecks Before Filing Income Taxes


State Taxes

Similar to Federal Income tax, state tax is taken in order to benefit the public services specific to your local area. Meaning that the more you pay in state taxes, the better-funded your transportation is, the children’s parks, the road quality, etc. These taxes directly benefit your community, which might help take the sting out the next time that you see the deduction. 

Each state has its own tax structure, so again you should be able to check how much you’re expected to pay using an online calculator - or discuss it with your employer. Sometimes you will have to pay state tax and a local tax, which just helps smaller portions of your local community, however not every state has this.

Also read: Work From Home Tax Deductions Due To Covid-19 

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FICA stands for Federal Insurance Contribution Act, and it includes social security and Medicare taxes. Fortunately, these taxes are both fixed numbers, regardless of your wage: your social security tax is 6.2% of your paycheck (so long as you are at or below the social security base), and Medicare comes in at 1.45% of your wage. Altogether, the FICA tax takes 7.65% of your paycheck, and your employer must also pay the same rate towards this tax. 

These taxes go to benefit people, rather than public services. So for example social security goes towards people who are retired, or disabled, or have recently deceased family members and might be struggling financially. Medicare on the other hand goes towards hospital-related benefits, such as hospice and end-of-life care, or home health care. These payments can be life-saving to some families and are so necessary for so many people. 


Court Ordered Child Support

If you or someone you know, perhaps your child’s other parent, has failed to pay child support for whatever reason, they could be issued a court order, meaning that their employer needs to withhold the agreed-upon amount from their paycheck so that it can go directly to the child’s primary caregiver or parent. Again, the amount is typically dependent on their wage and is usually only court-ordered if the person has failed repeatedly to pay their child support without legal interference. 

Also read: A Full Guide on How to Calculate Income Tax On A Pay Check


Wage Garnishment

If you have significant unpaid debt, you may have a portion of your wage withheld in order to help pay this back. This will be discussed with you and your employer, and they could be ordered to include a wage garnishment tax on your paycheck by the courts or a government agency if this is the case. They will always include more information and it shouldn’t be more than you are able to give, but it could be a significant chunk of your wage, depending on how deep in debt you are or how much interest that debt incurs. 


Voluntary Deduction

As well as these mandatory deductions, you might also agree to some other deductions, though - as mentioned previously, you need to give written authorization for these taxes to be withheld from your paycheck. These taxes could include retirement or 401(k) plan contributions, in which case the deductions come back to you once you finish working and retire. 

Depending on your employment, you may also be able to benefit from health insurance for medical, dental, or vision plans, or life insurance. Again these are so important and potentially life-saving, so if you’re able to pay for this through your employer you might want to consider this deduction. 

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Short term, you could also authorize deductions such as paying for your uniform and/or tools, tuition or Certification deductions, donations to interoffice charities, or even interoffice purchases. If your office is removing some equipment and you’d like to purchase it instead of seeing it go to the dump, then you could discuss deducting the amount from your paycheck. 

If this is the case then you and your employer would need to create a contract clearly stating the amount that you will be paying, how frequently you’ll pay, and how long these payments will go on for. Your employer is not allowed to deduct anything voluntary from your paycheck without this express consent. 

Hopefully, this has helped you understand the deductions that you might see on your paycheck, and ease your mind. Although it’s never nice to see less money than you were expecting, you can rest assured that the money is going to people who need it, and public services that help make your life easier… Or at least they are in theory.

Frequently Asked Questions

Yes, you can change the number of allowances you claim on your W-4 form, which will affect the amount of Federal and State Income Tax withheld from your paycheck. However, consult a tax professional before making changes to ensure you are not under-withholding.

You may be eligible for a refund on the Federal and State Income Taxes if you overpaid throughout the year, which will be determined when you file your tax return.

These deductions are calculated based on your income, filing status, and the number of allowances you claim on your W-4 form. Some deductions, such as Social Security and Medicare, have fixed percentages, while others vary depending on your tax bracket.

Local Taxes are taxes imposed by local governments such as cities, counties, or school districts. They may include property taxes, sales taxes, or income taxes, and are used to fund local programs and services.

1. Federal Income Tax, 2. State Income Tax, 3. Social Security Tax, 4. Medicare Tax, and 5. Local Taxes (if applicable).

The Federal Income Tax is a tax levied by the U.S. government on an individual's earnings. It helps to fund various government services and programs.

The Medicare Tax is a tax that funds Medicare, a federal health insurance program for individuals who are 65 or older, certain younger individuals with disabilities, and people with end-stage renal disease.

The Social Security Tax is a tax that funds Social Security, a program that provides financial support to retired individuals, disabled persons, and their dependents.

The State Income Tax is a tax imposed by individual states on an individual's earnings. The revenue collected from this tax is used to fund state-specific programs and services.

These deductions are required by law, and employers must withhold these amounts from an employee's paycheck to cover taxes and insurance.
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What Are The 5 Mandatory Deductions From Your Paycheck?
Samantha Clark

A Warrington College of Business graduate, Samantha handles all client relations with our top-tier partners. Read More

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