Gross vs Net Pay: Calculating Take-Home Pay

Your salary on paper is rarely what lands in your bank account. The gap between the two — gross pay versus net pay — trips up budgeting and job offers alike. Here is what the difference actually is and how to estimate your real take-home pay.

Gross pay vs net pay

Gross pay is your total earnings before anything is taken out — the headline salary or hourly rate × hours. Net pay (take-home pay) is what remains after taxes and deductions. Net is always the smaller, real-world number.

What gets deducted

• Income tax — national and, in some places, state or local.
• Social/payroll contributions — things like Social Security, National Insurance or provident fund.
• Retirement contributions — 401(k), pension or similar, often pre-tax.
• Other — health insurance premiums, union dues, garnishments.

What is an effective tax rate?

Your effective tax rate is total tax divided by gross pay — the single percentage that captures everything withheld. It is lower than your top marginal bracket, because only your highest slice of income is taxed at the top rate. The easiest way to find yours is from a recent payslip: total deductions ÷ gross.

A worked example

On $60,000 gross with a 22% effective rate and a 5% retirement contribution, roughly $13,200 goes to tax and $3,000 to retirement, leaving about $43,800 net per year. Estimate yours per paycheck with the take-home pay calculator.

Comparing offers and rates

When weighing jobs, compare net pay, not gross — benefits and contribution rates change the picture. To line up an hourly role against a salary, convert both with the salary to hourly calculator. And before committing to a big expense like a home, check your payment against net income, not gross, using the mortgage calculator.