Net Pay vs Gross Pay: Difference and How to Calculate

Your paycheck stub shows two key numbers: gross pay and net pay. Understanding the difference, and what causes the gap, puts you in control of your finances.

Use our Paycheck Calculator to calculate both for your specific situation.

Gross Pay vs. Net Pay: Quick Definitions

	Gross Pay	Net Pay
Definition	All earnings before deductions	What hits your bank account
Also called	Pre-tax income	Take-home pay
Includes	Salary, wages, bonuses, overtime	What’s left after all deductions

What Gets Deducted from Gross to Net?

1. FICA Taxes (Always 7.65%)

Tax	Rate	2026 Cap
Social Security	6.20%	First $184,500
Medicare	1.45%	No cap
Additional Medicare	0.90%	Over $200,000 (single)

FICA is flat, it applies the same regardless of income level. On a $60,000 salary, FICA takes $4,590/year.

2. Federal Income Tax (Progressive, 10-37%)

Your effective federal tax rate is typically 5-20% for most American workers. This is calculated on taxable income (gross minus standard deduction and pre-tax deductions).

3. State Income Tax (0-13.3%)

Varies widely by state:

• No state tax (9 states): Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska, Tennessee (investment income only), New Hampshire (investment income only)
• Flat rate: Illinois (4.95%), Pennsylvania (3.07%), Indiana (2.95%), Arizona (2.5%), Colorado (4.4%)
• Progressive (high): California up to 13.3%, Oregon up to 9.9%, Hawaii up to 11%

4. Pre-Tax Voluntary Deductions

These reduce your taxable income:

• 401(k) / 403(b): Up to $24,500 in 2026
• Health/dental/vision insurance premiums (employer-sponsored)
• HSA contributions: Up to $4,400 (individual) in 2026
• FSA contributions: Up to $3,400 in 2026
• Transit/commuter benefits: Up to $340/month in 2026

5. Post-Tax Voluntary Deductions

These come out after taxes and don’t reduce taxable income:

• Roth 401(k) or Roth IRA contributions
• Life insurance (above $50,000 coverage)
• Union dues
• Wage garnishments

Real Example: $70,000 Salary, Texas, Biweekly

Gross biweekly pay: $2,692.31

Deduction	Amount
Federal income tax	−$202
Social Security	−$158
Medicare	−$37
State income tax	$0 (Texas)
401(k) 6%	−$161
Health insurance	−$150 (example)
Net biweekly pay	$1,984

The gap: $2,692 gross → $1,984 net = $708 in deductions per paycheck. Social Security and Medicare are lower than 7.65% of gross here because the pre-tax health premium is exempt from FICA; the 401(k) deferral is not.

How to Increase Your Net Pay

1. Increase 401(k) contributions Counterintuitively, contributing more to a 401(k) reduces your taxable income and lowers tax withholding, so your take-home only decreases by roughly 70-80% of your contribution.

2. Adjust your W-4 If you consistently get a large tax refund, you’re over-withholding, giving the IRS an interest-free loan. Adjust your W-4 to take more home each paycheck.

3. Use an FSA for healthcare expenses If you have predictable medical expenses, an FSA reduces taxable income.

4. Check your state If you’re mobile, relocating from a 5% income-tax state to a no-tax state on a $70,000 salary means ~$3,500 more/year in take-home.

See your exact gross-to-net breakdown with our Paycheck Calculator.