Gross pay vs. net pay: where the money actually goes
Two numbers, and the distance between them is the entire subject of payroll.
Tax year 2026. Last reviewed .
The two numbers
Gross pay is your salary before anything is removed — the number in the offer letter, divided by how often you are paid. Net pay, sometimes called take-home pay, is what actually lands in your account. Every payroll question is really a question about what sits between them.
The order matters, because some deductions reduce the income that later deductions are calculated on.
Pre-tax deductions come out first
Pre-tax deductions are taken before income tax is calculated, which means they reduce your taxable income as well as your take-home. Traditional 401(k) contributions, most health insurance premiums, HSA and FSA contributions typically work this way.
This is why a 401(k) contribution costs you less in take-home than its face value: the money leaves your gross, so you are not taxed on it. It is also why the "I cannot afford to contribute" instinct tends to overstate the cost.
Then the taxes
Payroll taxes are charged on your wages at a fixed rate, with no brackets and no deductions to shelter them:
| Tax | Rate | Applies to | Source |
|---|---|---|---|
| Social Security | 6.2% | Wages up to $184,500 a year. Nothing above that. | SSA 2026 Cost-of-Living Adjustment Fact Sheet / Contribution and Benefit Base read 2026-07-18 |
| Medicare | 1.45% | Every dollar of wages. There is no upper limit. | IRS Publication 15 (2026), Circular E, section 9 read 2026-07-18 |
| Additional Medicare | 0.9% | Wages over $200,000 a year, on top of the Medicare rate. Employers apply this by wages alone, whatever your filing status. | IRS Publication 15 (2026), Circular E, Additional Medicare Tax withholding read 2026-07-18 |
Income tax — federal, state, and sometimes local — is calculated on what remains after pre-tax deductions. Federal income tax is progressive, so it is charged in layers rather than at one rate on everything. This is the source of a persistent myth: a raise that moves you into a higher bracket only taxes the dollars above that threshold at the higher rate. Nobody has ever taken home less by earning more through a bracket change.
Post-tax deductions come last
Anything left — Roth 401(k) contributions, some insurance products, union dues, garnishments, charitable giving through payroll — comes out after tax has been calculated. These reduce your net pay without reducing your taxable income.
A Roth contribution is the clearest example: you pay tax on the money now, so it costs full price today, in exchange for tax-free growth later.
A worked example
Everything above, on one paycheck:
| Gross pay | $2,884.62 |
|---|---|
| Federal income tax | -$295.00 |
| Social Security | -$178.85 |
| Medicare | -$41.83 |
| New York income tax | -$134.07 |
| Take-home pay | $2,234.87 |
That is $58,106.62 a year, or 77.5% of the salary. Single filer, no pre-tax deductions. Computed with the same engine as the calculator.
Single filer, paid every two weeks, no pre-tax deductions. Add a 401(k) contribution and both the federal and state lines fall, which is the mechanism the previous section describes.