Landing your first summer job is an exciting milestone. It can mean more freedom, spending power, and opportunities to save for your goals.
Then your first paycheck arrives and it isn’t as much as you expected. Where did the rest of your money go? Many first time workers are surprised to learn that taxes and other deductions come out of their paycheck before they get paid.
What many people don’t realize is that not all summer jobs work the same way. The type of job you choose can affect how you’re paid, what taxes you owe, and how much responsibility you have for managing your money.
When you know how your paycheck works, and combine that knowledge with a tool like Greenlight, you can budget more confidently, avoid surprises, and make smarter decisions with every dollar you earn.
Why is your paycheck smaller than your hourly wage?
Let’s say you earn $15 per hour and work twenty hours a week. You might expect your paycheck to equal every dollar you earned. Instead, you’ll probably notice money was deducted before you were paid.
These deductions may include:
- Federal income tax
- Maryland state income tax
- Local income tax
- Social Security tax
- Medicare tax
The amount you earn before taxes is called your gross pay. The amount that actually lands in your account after taxes and deductions is called your net pay.
Understanding the difference helps you build a realistic budget based on the money you actually have available to spend and save.
The two most common types of summer jobs
Before you accept a summer job, it’s helpful to know whether you’ll be working as a W-2 employee or a 1099 independent contractor.
Both can be great ways to earn money, but they handle taxes differently.
W-2 employee | 1099 independent contractor |
Taxes are usually withheld from each paycheck automatically. | You’re generally responsible for setting aside money to pay taxes yourself. |
Your employer provides a W-2 tax form after the end of the year. | Clients may provide a 1099 tax form if you meet reporting requirements. |
Often offers more structure and workplace protections. | Offers more flexibility, but more financial responsibility. |
Common examples include retail, restaurants, camps, pools, and recreation jobs. | Common examples include babysitting, tutoring, lawn care, pet sitting, and freelance work. |
Which type of job is right for you?
Neither option is automatically better. The right choice depends on your goals and experience.
A W-2 job may be a good fit if you:
- Want taxes taken out automatically.
- Prefer a consistent schedule.
- Are working your first job.
- Want more guidance from an employer.
A 1099 job may be a good fit if you:
- Want flexibility over your schedule.
- Enjoy working independently.
- Feel comfortable tracking your income.
- Can set aside money for taxes throughout the year.
One important note: just because someone calls you an independent contractor doesn’t necessarily mean that’s the correct classification. Worker classification depends on how much control the employer has over your work. If you’re unsure, ask questions before accepting the job or review IRS guidance.
Understanding the taxes you’ll pay
If you earn money in Maryland, you’ll likely pay several different types of taxes.
- Income taxes help fund government services. They may include federal, Maryland state, and local income taxes.
- Payroll taxes help fund programs like Social Security and Medicare.
If you’re a W-2 employee, these taxes are usually withheld automatically from each paycheck. If you’re working as an independent contractor, taxes generally aren’t withheld. This means you’ll need to set aside part of each payment yourself so you’re prepared when taxes are due.
A good habit is to review your pay stub every payday. Look to see how much you earned, what was deducted, and how much you actually took home.
You may need to file a tax return
Many first time workers are surprised to learn they may need to file a tax return.
The taxes withheld from your paycheck are estimates based on what you expect to earn during the year. Filing a tax return helps determine whether you paid the correct amount. You may receive a refund if your employer withheld too much, or you may owe additional taxes if they didn’t withhold enough.
Filing requirements change from year to year based on your income and tax situation, so it’s important to review the current IRS guidance before tax season.
Even if you aren’t required to file, it may still be worth doing so. If too much tax was withheld from your paycheck, you could receive that money back as a refund. Some students may also qualify for education related tax credits.
Before you accept a summer job, ask these five questions
Taking a few minutes to ask questions before you start working can help you avoid surprises later.
- Will I be a W-2 employee or a 1099 independent contractor?
- Will taxes be withheld from my paycheck?
- How often will I get paid?
- Will I receive a pay stub?
- Will I need to set aside money for taxes myself?
Knowing the answers can help you better understand how much money you’ll actually take home and how to better plan for your financial goals.
Include taxes in your savings plan
If you’re a W-2 employee:
- Base your budget on your net pay, not your gross pay.
- Set up automatic transfers to savings each payday.
- Consider saving part of any tax refund toward a future goal.
If you’re earning 1099 income:
- Keep money for taxes separate from your personal savings.
- Set aside part of every payment for future tax bills.
- Track your income throughout the year.
Building these habits early can make managing your money much easier as your income grows.
Every paycheck is a chance to build financial confidence
Your first summer job teaches more than workplace skills. It helps you understand how earning, saving, and planning for the future all work together.
Whether you’re opening your first savings account or working toward your next financial goal, our savings accounts and financial education resources can help you build strong money habits from the start. You can also explore the Greenlight debit card for kids to help practice earning, saving, spending, and budgeting before, and after, that first paycheck arrives.
