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What Is a Payroll Deduction?

A payroll deduction is any amount taken off one’s paycheck. When there are payroll deductions, the employee will take home a lower amount. There are standard items that are included as payroll deductions, though these items will differ depending on the location. There are also voluntary deductions, which the employee can decide on.

What are the standard payroll deductions? In the United States, generally, you can expect payroll deductions such as income taxes (at the federal level), state taxes, and payments to social security. Now, depending on the state and city, additional payroll deductions will be added. These additional deductions may come in the form of city taxes, county taxes, and local taxes. More so, payments for unemployment insurance and disability insurance may be required.

As for voluntary payroll deductions, these appear when the employee decides to participate in a program. Usually these programs will result in some sort of benefit for the employee. For example, a company may offer subsidized health insurance or life insurance packages. The rest of the premium payments may be deducted from the salary of the employee. Other payments that fall under voluntary payroll deductions include retirement savings plans (401k), health savings accounts, and the like.

Just as the nature of the payroll deductions will vary, the amount will also vary. The amount of the payroll deductions usually depend on the total amount that the person earns. In the case of voluntary payroll deductions, the amount will depend largely on the decision of the employee.

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