Gross vs net pay: what comes out of your paycheck

Gross pay is everything you earned in a pay period before any taxes or deductions come out. Net pay is what's left after all of them: the amount on your check or in your direct deposit. Salaries, hourly rates and job offers are quoted as gross pay. Your budget runs on net pay.

The gap between the two is usually bigger than people expect. This guide walks through each item that sits between gross and net, then works one realistic paycheck from top to bottom.

What counts as gross pay

For a salaried employee, gross pay per check is the annual salary divided by the number of pay periods: 26 for biweekly, 24 for semimonthly, 52 for weekly and 12 for monthly. For an hourly employee, it's the hourly rate times the hours worked, plus overtime at one and a half times the regular rate for hours over 40 in a workweek. The hourly vs salary help article shows both.

Gross pay also includes bonuses, commissions, holiday pay and paid time off. On a pay stub, gross pay is the total of the earnings section, before the deductions start.

What counts as net pay

Net pay is gross pay minus three groups of items, taken in this order: pre-tax deductions, taxes, then post-tax deductions. The order matters, because pre-tax deductions shrink the wages that some taxes are figured on. On most stubs, net pay sits at the bottom with a year-to-date total beside it. If you're not sure where to find it, see how to read a pay stub.

Everything between gross and net

Pre-tax deductions. A traditional 401(k) contribution is left out of federal income tax withholding, but Social Security and Medicare are still figured on it (IRS Topic 424). The 2026 limit on employee 401(k) deferrals is $24,500, plus $8,000 in catch-up contributions from age 50 ($11,250 for ages 60 to 63). Health, dental and vision premiums and HSA contributions run through a Section 125 cafeteria plan are generally free of income tax and FICA. The 2026 HSA limit is $4,400 for self-only coverage and $8,750 for family coverage.

Taxes. Federal income tax withholding is set by your Form W-4 and the IRS tables in Publication 15-T. Social Security is 6.2% of wages up to $184,500 in 2026, and Medicare is 1.45% of all wages, plus 0.9% on wages over $200,000 in the year. The FICA tax guide covers those in detail. Most states also tax wages, though a handful (such as Texas and Florida) don't, and some cities and counties add a local income tax. A few states also take a small amount for disability or paid family leave.

Post-tax deductions. These come out after taxes are figured, so they don't lower any tax. Roth 401(k) contributions are the common one: you pay tax now and qualified withdrawals later are tax free. Wage garnishments for debts or child support are post-tax too, and federal law caps how much can be taken. For ordinary debts the cap is generally 25% of disposable earnings (Department of Labor Fact Sheet #30).

Worked example: one biweekly paycheck

Say you earn $65,000 a year, paid biweekly, so each check starts at $2,500.00 gross. You're single with no dependents and nothing else on your W-4. You put 5% into a traditional 401(k), pay $75.00 per check for health insurance through a Section 125 plan, and pay $25.00 in union dues. You work in Texas, which has no state income tax.

Federal income tax, step by step. Start with wages for income tax: $2,500.00 minus the $125.00 401(k) and the $75.00 health premium is $2,300.00. Multiply by 26 pay periods to get $59,800 a year. Subtract the 2026 standard deduction for a single filer, $16,100, which leaves $43,700. Under the 2026 brackets, the first $12,400 is taxed at 10% ($1,240) and the remaining $31,300 at 12% ($3,756), for $4,996 a year. Divide by 26 and the withholding is $192.15 per check. That's the same figure the Publication 15-T annual percentage method gives for this W-4.

Social Security and Medicare. Only the health premium lowers FICA wages, so they're figured on $2,500.00 minus $75.00, or $2,425.00. The 401(k) money is still taxed for FICA.

Out of $2,500.00 gross, $377.66 went to taxes (about 15%), $225.00 went to deductions, and $1,897.34 (about 76%) reached the bank. In a state with an income tax there would be one more line, and your net pay would be lower. The pre-tax vs post-tax deductions article runs a similar example.

Annual pay vs per-check pay

To turn per-check figures into a year, multiply by the number of pay periods. In the example, $1,897.34 × 26 is $49,330.84 of take-home pay on a $65,000 salary. That's a good estimate, but real years rarely match it to the cent:

• Social Security stops once your wages pass $184,500, so very high earners see bigger checks late in the year.
• The extra 0.9% Medicare starts once wages from one employer pass $200,000.
• A 401(k) contribution stops if you reach the yearly limit before December.
• Bonuses can be withheld at a flat supplemental rate, so a bonus check looks different from a regular one.
• With biweekly pay, some employers take benefit deductions from only 24 of the 26 checks. See biweekly vs semimonthly pay.

Withholding is also only a prepayment. Your actual federal income tax is settled when you file your return, so the year can end in a refund or a balance due.

How to estimate your take-home pay

1. Find your gross pay per check: salary divided by pay periods, or rate times hours.
2. Subtract pre-tax deductions to get wages for income tax. Subtract only the Section 125 items to get wages for FICA.
3. Estimate federal withholding: multiply income tax wages by the pay periods, subtract the standard deduction ($16,100 single, $32,200 married filing jointly, $24,150 head of household in 2026), apply the brackets, then divide back by the pay periods.
4. Take 6.2% and 1.45% of FICA wages for Social Security and Medicare.
5. Add state and local income tax if your state and city have one.
6. Subtract post-tax deductions. What's left is net pay.

Or skip the arithmetic: the free paycheck calculator does every step for any salary or hourly rate, any pay frequency and every state, including 401(k) and health insurance. If you need a record of a paycheck afterward, Paystub.biz can turn the same numbers into a pay stub.

Withholding depends on your W-4 and your employer's payroll setup, so your real check can differ from an estimate by a few dollars.