Updated June 15, 2026 · 4 min read
Gross pay is your total earnings before anything is taken out. Net pay — also called take-home pay — is what's left after taxes and deductions are withheld, and it's the amount that actually hits your bank account. The gap between them is usually 20–35% of gross, depending on your income, state, and benefits.
Gross pay is the headline number on a job offer. For a salaried worker it's your annual salary divided by the number of pay periods. For an hourly worker it's your hourly rate times hours worked, plus any overtime.
Net pay is your gross pay minus every deduction your employer withholds. Those deductions fall into two buckets: taxes you must pay, and optional benefits you've signed up for.
Taxes withheld from almost every paycheck:
Optional deductions include 401(k) contributions, health-insurance premiums, HSA/FSA contributions, and after-tax items like Roth 401(k) or union dues.
Two reasons usually explain a smaller-than-expected paycheck. First, FICA alone takes 7.65% off the top before income tax even applies. Second, pre-tax benefits like a 401(k) reduce your take-home cash even though they aren't taxes — that money is going into your retirement account, not the government's pocket.
Net pay is your take-home pay — the amount left after federal income tax, Social Security, Medicare, state and local income tax, and any benefit deductions are withheld from your gross (total) pay.
Gross pay is your total earnings before any deductions. Net pay is what you actually receive after taxes and deductions. The difference is typically 20–35% of gross pay.
Your salary is gross pay. Net pay is lower because Social Security (6.2%), Medicare (1.45%), federal income tax, often state income tax, and pre-tax benefits like 401(k) and health insurance are all subtracted before you're paid.