Your "take-home" or net pay is often significantly lower than your gross salary due to a combination of mandatory and voluntary deductions. Mandatory deductions include federal and state income taxes, as well as FICA taxes (Social Security and Medicare). Voluntary deductions can include contributions to a 401(k) retirement plan, health insurance premiums, life insurance, or flexible spending accounts. If your pay seems unusually low, check your paystub to ensure your tax withholding allowances (W-4 form) are set correctly and aren't causing over-withholding.

Overtime pay is taxed as ordinary income, just like your regular wages. However, a significantly larger paycheck due to overtime can sometimes trigger a higher withholding rate for that specific pay period because the payroll system might project that you will earn that higher amount for the entire year. While you might see more tax taken out immediately, your actual tax liability is determined when you file your annual return. Any excess amount withheld during the year will typically be refunded to you.