Net Pay vs. Gross Pay

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 $176,100
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 10-20% 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 (3.15%)
• Progressive (low): Arizona up to 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 $23,500 in 2026
• Health/dental/vision insurance premiums (employer-sponsored)
• HSA contributions: Up to $4,300 (individual) in 2026
• FSA contributions: Up to $3,300 in 2026
• Transit/commuter benefits: Up to $325/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	−$271
Social Security	−$167
Medicare	−$39
State income tax	$0 (Texas)
401(k) 6%	−$161
Health insurance	−$150 (example)
Net biweekly pay	$1,904

The gap: $2,692 gross → $1,904 net = $788 in deductions per paycheck.

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.