Gross pay is what you earn. Take-home pay is what you can spend. The gap is federal income tax withholding, Social Security, Medicare, any state or local income tax, and the deductions you elected — 401(k), health premiums and the rest. Understanding each layer makes a pay stub readable and a job offer comparable.
This guide uses 2026 federal figures from IRS sources already wired into our tools, and shows worked examples from the paycheck calculator.
Gross pay versus net pay
Gross pay for a salaried worker is annual salary divided by the number of pay periods, plus any taxable bonuses or commissions in that period. Net pay is gross minus every deduction and tax line. Year-to-date columns on a stub add those amounts across the year so far — useful when you compare a stub with a W-2 later.
If two offers show the same salary in different states, net pay can still differ by thousands of dollars a year because of state income tax. Compare net, not just gross.
Federal income tax withholding and the W-4
Federal income tax is withheld from each paycheck based on your wages and the Form W-4 you gave your employer. Withholding is an installment plan toward your eventual tax bill, not the bill itself. Too little withheld and you may owe at filing time; too much and you fund an interest-free refund.
The underlying annual tax uses the 2026 brackets and standard deduction from IRS Revenue Procedure 2025-32. For a single filer the 2026 standard deduction is $16,100; for married filing jointly it is $32,200. Brackets start at 10% and step up to 37% on taxable income. The income tax calculator shows the annual picture bracket by bracket; the paycheck calculator spreads a similar estimate across pay periods.
Social Security and Medicare (FICA)
IRS Topic 751 sets out the employee FICA rates for 2026:
- Social Security: 6.2% on wages up to the wage base of $184,500
- Medicare: 1.45% on all covered wages
- Additional Medicare Tax: 0.9% that employers withhold on wages above $200,000 in a calendar year, regardless of filing status
Employers also pay matching Social Security and Medicare amounts (they do not match Additional Medicare Tax). FICA is separate from income tax; pre-tax 401(k) contributions usually do not reduce Social Security or Medicare wages the way they reduce income-tax wages.
State and local taxes
Most states tax wage income; some do not. Local payroll or income taxes exist in some cities and counties. Our paycheck calculator models state income tax where the state taxes wages and leaves out most local taxes — so a stub from New York City or certain Ohio localities can show extra lines the calculator does not.
On a $75,000 salary, paid every two weeks, single, with no 401(k):
- In Texas (no state income tax): about $61,593 net per year (~$2,369 per paycheck), effective tax rate about 17.9%
- In California: about $58,805 net per year (~$2,262 per paycheck), effective tax rate about 21.6%
Federal income tax and FICA are the same in both examples ($7,670 federal, $4,650 Social Security, $1,088 Medicare). The gap is state tax.
Pre-tax versus after-tax deductions
Pre-tax deductions (traditional 401(k), many health, dental and vision premiums, HSA/FSA contributions) come out before income tax is figured and lower federal taxable wages. They usually still leave FICA wages higher than income-tax wages.
After-tax deductions (Roth 401(k), some insurance, garnishments) come out after tax is figured. They do not shrink federal withholding the way traditional 401(k) contributions do.
Example: same Texas single filer on $75,000 who contributes 10% to a traditional 401(k). Annual net cash falls to about $55,743 because $7,500 went to the 401(k), but federal income tax drops from about $7,670 to about $6,020. Part of the “missing” take-home is savings, not tax.
Estimate yours
Open the paycheck calculator, enter salary, pay frequency, filing status, state and 401(k) percent. Compare the result with a recent stub. Large gaps usually trace to W-4 extra withholding, benefits the calculator does not model, local taxes or bonuses. For the annual federal bill alone, use the income tax calculator. For a line-by-line stub tour, see How to Read Your Pay Stub.
Bonuses, commissions and irregular pay
Extra checks are often taxed with a flat percentage withholding method for federal income tax, which can make a bonus stub look “over-taxed.” The annual return still settles against the brackets; withholding is only an estimate. If you receive large irregular pay, the IRS Tax Withholding Estimator (on IRS.gov) and a mid-year W-4 tweak can reduce surprises. Re-run the paycheck calculator with your annual expected total, not a single bonus check, when you are planning a budget.
Putting take-home pay to work
Once you know the net number, build the budget from it: housing, debt minimums, food, then automated savings and retirement contributions. If a traditional 401(k) contribution is the reason net pay looks lower, remember that part of the gap is wealth you kept. Compare job offers on net pay in each state, benefits, and commute cost — not on salary alone.
Take-home pay is the budget number that matters. Gross salary is only the starting line.