How to Calculate Take-Home Pay

Updated June 2026 - 5 min read

Your gross pay is what your employer agrees to pay you. Your take-home pay - or net pay - is what actually lands in your bank account after all deductions. The gap between the two can be significant, and understanding each deduction helps you budget more accurately.

Step 1: Start with Gross Pay

Gross pay is your salary before any deductions. For hourly workers it is your hourly rate multiplied by hours worked, plus any overtime. For salaried workers it is your annual salary divided by the number of pay periods (26 for biweekly, 24 for semi-monthly, 12 for monthly).

Step 2: Federal Income Tax

Federal income tax is withheld based on your W-4 elections and the IRS withholding tables. The US uses a progressive tax system - income is taxed at different rates in different brackets. For 2025, the brackets range from 10% to 37%. Your employer withholds based on your filing status and allowances.

Step 3: FICA Taxes (Social Security and Medicare)

FICA stands for Federal Insurance Contributions Act. These are mandatory:

• Social Security: 6.2% of gross wages, up to the annual wage base ($168,600 for 2024)
• Medicare: 1.45% of all wages, plus an additional 0.9% for wages over $200,000
• Your employer matches the 6.2% and 1.45%, so the total FICA contribution is 15.3% of your gross pay

Step 4: State and Local Taxes

Most US states have their own income tax, ranging from 0% (no state tax in Texas, Florida, Nevada, and others) to over 13% in California. Some cities also levy local income taxes. Check your state tax agency for current rates and brackets.

Step 5: Pre-Tax Deductions

Contributions to 401(k), HSA, FSA, and certain health insurance premiums are deducted before taxes are calculated. This reduces your taxable income and therefore your tax bill. A $200 per paycheck 401(k) contribution might only reduce your take-home by $140 after accounting for the tax savings.

Step 6: Post-Tax Deductions

Roth 401(k) contributions, union dues, life insurance premiums, and wage garnishments are deducted after taxes. These do not reduce your taxable income.

Quick Example (Biweekly)