Gross Pay vs. Net Pay: What's the Difference?

Quick Answer

Gross pay is what you earn before deductions; net pay (take-home pay) is what's left after them. Net pay = gross pay − federal tax − state tax − Social Security (6.2%) − Medicare (1.45%) − any benefits like 401(k) or health insurance. Example: a $60,000 single-filer salary is about $50,381 net a year (~$1,938 per bi-weekly check) after federal tax and FICA — a state income tax and benefits would lower it further. Always budget with net pay.

Your job offer says one number. Your bank deposit says a smaller one. The gap between them is the difference between gross pay and net pay — and understanding it is the key to budgeting, negotiating, and reading your own paycheck.

Here's exactly what each term means, how to get from one to the other, and a real breakdown of where the money goes.

Gross pay vs. net pay: the difference

Gross pay

The total you earn before any deductions. For salaried workers it's your annual salary; for hourly workers it's hours worked × your rate (plus overtime). This is the "headline" number on your offer letter.

Net pay (take-home)

What's left after taxes and deductions — the amount deposited in your account. Also called take-home pay. This is the number you should actually budget with.

Net pay = Gross pay − Taxes − Deductions

What gets deducted from gross pay?

The trip from gross to net has two kinds of deductions — mandatory taxes and voluntary benefits:

Mandatory (taxes)

Federal income tax — based on the 2026 brackets and your Form W-4.
State income tax — depends on your state; nine states have none.
Social Security — 6.2% of wages up to $184,500 (2026).
Medicare — 1.45% of all wages, no cap.

Voluntary (benefits & other)

401(k) or 403(b) retirement contributions.
Health, dental, and vision insurance premiums.
HSA or FSA contributions.
Wage garnishments, union dues, or other elected withholdings.

Example: $60,000 gross to net

Here's a single filer on a $60,000 salary, shown per year and per bi-weekly paycheck (26 a year). This example uses federal tax and FICA only — a state income tax or benefit deductions would lower net pay further.

Line	Per year	Per paycheck
Gross pay	$60,000	$2,308
− Federal income tax	$5,030	$193
− Social Security (6.2%)	$3,720	$143
− Medicare (1.45%)	$870	$33
= Net pay	$50,381	$1,938

2026 IRS data (Revenue Procedure 2025-32), single filer, no state tax, standard deduction. Run your own gross-to-net breakdown →

Which number should you use?

Budgeting & saving: use net pay — it's the money you actually control.
Comparing job offers: compare net, since two equal salaries in different states can have very different take-home.
Mortgage & rent qualification: lenders and landlords typically use gross income for their ratios.
Negotiating salary: the offer is quoted in gross, but know your net before you accept.

To see your own gross-to-net breakdown, use the paycheck calculator or the take-home pay calculator. Comparing two offers? The salary calculator shows net pay for any salary and state.

Frequently Asked Questions

What is the difference between gross pay and net pay?

Gross pay is the total you earn before anything is taken out — your salary or your hours times your rate. Net pay (also called take-home pay) is what's left after taxes and deductions. Net pay is always lower than gross pay, and it's the amount that actually lands in your bank account.

How do I calculate net pay from gross pay?

Start with gross pay, then subtract: federal income tax, state income tax (if your state has one), Social Security (6.2%), Medicare (1.45%), and any voluntary deductions like 401(k) contributions or health insurance premiums. What remains is your net pay. A paycheck calculator does all of this automatically.

Is take-home pay the same as net pay?

Yes. 'Take-home pay' and 'net pay' mean the same thing — the money you actually receive after every tax and deduction. It's the number to budget with, not your gross salary.

Why is my net pay so much lower than my gross pay?

Taxes are the main reason. Federal income tax, FICA (7.65% for Social Security and Medicare), and state income tax together commonly take 20–35% of gross pay. Voluntary deductions like 401(k), HSA, and health insurance lower your net further — though those are money going to your benefit, not lost.

Which number should I use for a budget — gross or net?

Always budget with net pay. Gross pay overstates what you can actually spend because it includes money that never reaches your account. Rent guidelines, loan applications, and savings goals should all be based on your take-home (net) pay.

Do lenders and landlords look at gross or net income?

Lenders and landlords usually qualify you on gross income (for example, the common rule that rent shouldn't exceed 30% of gross, or debt-to-income ratios based on gross). But you should still budget your own life around net pay, since that's what you actually have to work with.

Are pre-tax deductions taken from gross or net pay?

Pre-tax deductions like traditional 401(k), HSA, and many health insurance premiums come out of your gross pay before income tax is calculated, which lowers your taxable income. Post-tax deductions (like a Roth 401(k)) come out after taxes. Both reduce your net pay, but only pre-tax deductions also cut your tax bill.

How much is $60,000 gross pay after taxes?

A single filer earning $60,000 takes home about $50,381 a year in a no-state-income-tax state — roughly $1,938 per bi-weekly paycheck — after $5,030 in federal income tax and $4,590 in FICA. In a state with income tax, net pay would be a few thousand dollars lower.