The short definitions
Gross pay is your full earnings before anything is taken out — your salary or hourly wages times hours worked, before taxes or any other deduction. Net pay (also called take-home pay) is what's actually deposited into your bank account after every deduction has been subtracted. The gap between the two is entirely made up of taxes and, if applicable, benefit deductions — nothing else changes it.
What typically gets deducted
- Federal income tax — withheld based on your income, filing status, and the elections on your Form W-4. This uses progressive tax brackets, meaning different portions of your income are taxed at different rates.
- FICA taxes (Social Security & Medicare) — a flat-rate payroll tax that funds these federal programs, separate from income tax. See FICA taxes explained for the exact 2026 rates and thresholds.
- State and/or local income tax — varies enormously by location; nine US states have no wage income tax at all, while others have their own bracket structures independent of federal rules.
- Pre-tax benefit deductions — contributions to a traditional 401(k), a Health Savings Account (HSA), or certain other employer benefits are often deducted before federal tax is calculated, which lowers your taxable income (and therefore your federal tax) in addition to funding the benefit itself.
- Post-tax deductions — some benefits (like Roth 401(k) contributions or certain insurance premiums) are deducted after tax is already calculated, so they reduce net pay without affecting your taxable income.
Worked example: $2,500 gross biweekly pay, single filer, 2026
This matches the default example on this site's own paycheck calculator — no state tax and no pre-tax deductions, so you can see the federal-only breakdown clearly:
On an annualized basis, this is $65,000 gross → $54,407.50 net (an effective federal rate of about 8.65%). Figures computed directly with this site's paycheck engine, using 2026 IRS federal brackets/standard deduction and 2026 FICA rates. Add your own pre-tax deductions or state rate in the calculator for a fuller picture.
In this example, roughly 16.3% of gross pay ($407.40 of $2,500) goes to federal tax and FICA combined, leaving $2,092.60 as net pay — and that's before any state tax, which would reduce net pay further for most filers. Note this example intentionally excludes state tax to isolate the federal-only picture; your actual take-home percentage will differ based on your state, filing status, and any pre-tax deductions.
Why net pay can look different from a "back of envelope" tax estimate
A lot of people estimate their take-home pay by just applying their marginal tax bracket rate to their whole salary, which overstates the tax and understates net pay. Because federal tax brackets are progressive, only the income within each bracket is taxed at that bracket's rate — the first portion of your income is taxed at 10%, the next portion at 12%, and so on, only reaching your top marginal rate on the last slice of income. This is why the effective rate (total tax ÷ total income) is meaningfully lower than your top marginal bracket in almost every case.
Frequently asked questions
Does gross pay include bonuses and overtime?
Yes — gross pay is your total earnings for the pay period before deductions, which includes regular wages, overtime, and any bonus paid in that period. Bonuses are sometimes withheld at a different flat supplemental rate by employers rather than the standard payroll tax tables, which is a separate topic from the standard gross-to-net calculation shown here.
Why is my actual paycheck different from this calculator's estimate?
This calculator uses a simplified, standard-deduction approach that approximates a single-job taxpayer's effective tax. Your actual employer withholding is based on IRS Publication 15-T's percentage-method tables, driven by your specific Form W-4 elections (multiple jobs, dependents, extra withholding requested) — so small differences from your actual pay stub are expected. See the paycheck calculator's full methodology notes for details.
Do pre-tax 401(k) contributions reduce my net pay by the full contribution amount?
Not quite — a pre-tax contribution reduces your net pay by the contribution amount minus the federal (and FICA, for some pre-tax benefits) tax you would have paid on that money anyway. So a $200 pre-tax 401(k) contribution typically reduces your take-home pay by somewhat less than $200, because it also lowers your tax bill.
Is net pay the same as disposable income?
Not necessarily — net pay is what hits your bank account from your paycheck, but you may have other post-tax obligations (loan payments, insurance premiums paid outside payroll) that further reduce what's truly "disposable." Net pay is a paycheck concept, not a full personal budget concept.