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Understanding W2 Income: Deductions, Contributions, and Net Pay

Updated: May 10

This segment delves into the specifics of W2 income, the most prevalent form of employment income, through the example of John, a W2 employee earning a gross monthly income of $10,000. It outlines the various deductions that come from this income, including FICA, federal, state, and local income taxes, as well as contributions towards Medicare and Social Security. Additionally, it covers deductions for health, vision, dental insurances, and retirement plan contributions, emphasizing the importance of maximizing 401K contributions to benefit from employer matching. The overview provides insight into how these deductions significantly reduce gross income to net income, setting the stage for a deeper exploration of different income types in subsequent discussions.


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