Gross pay vs. net pay

The two numbers, defined

Gross pay is your full earnings for the period before anything is withheld: salary divided by pay periods, or hours times rate plus overtime, bonuses and commissions. It's the number in your offer letter and the top line of your pay stub.

Net pay, also called take-home pay, is gross pay minus federal income tax, state income tax, Social Security, Medicare, and every benefit deduction. It's the bottom line of the stub and the amount of the deposit. For most workers net pay runs 70% to 80% of gross.

What comes out in between, in order

1. Pre-tax deductions: traditional 401(k), HSA, FSA, and Section 125 health, dental and vision premiums. These reduce the wages the taxes below are computed on.
2. Federal income tax: withheld per your W-4 using the 2026 brackets and standard deduction.
3. FICA: 6.2% Social Security on wages up to $184,500 plus 1.45% Medicare on everything.
4. State (and sometimes city) income tax: zero in nine states, up to 13.3% at the top in California.
5. Post-tax deductions: Roth 401(k), union dues, garnishments, child support.

A worked example: gross to net

A single filer in a no-income-tax state earns $60,000, is paid every two weeks, and puts $100 per check into a traditional 401(k):

• Gross pay per check: $2,307.69 ($60,000 ÷ 26)
• Pre-tax 401(k): −$100.00
• Federal income tax: −$181.08
• Social Security: −$143.08
• Medicare: −$33.46
• Net pay per check: $1,850.08 ($48,102 a year, plus $2,600 saved in the 401(k))

Net is 80% of gross here. In a state with income tax the same salary nets less; the take-home pay calculator has side-by-side tables for no-tax states, California and New York.

Converting gross to net (and net to gross)

Gross to net is what the paycheck calculator does: enter salary or hourly pay, state, filing status and deductions, and it returns the per-check net with each line itemized. The step-by-step take-home pay guide shows the same math by hand.

Net to gross runs backwards: "what salary do I need to take home $X?" There's no clean formula because tax is progressive, so iterate: guess a gross, run it through the calculator, and adjust. As a rough 2026 rule, divide the annual net you want by 0.75 in a no-tax state or 0.70 in a high-tax state to get a starting guess.

Which number to use where

• Rent applications and lenders usually ask for gross monthly income.
• Budgets should be built on net; spending plans written against gross overshoot by a quarter.
• Comparing job offers across states needs net: the same gross salary can differ by thousands after state tax.
• Retirement contribution percentages apply to gross pay, which is why a "6%" contribution feels smaller in your check; the 401(k) paycheck page quantifies it.