How take-home pay is calculated (with formulas)

Take-home pay (also called net pay) is the money you keep after your employer subtracts taxes and deductions from your gross pay. People often compare jobs by salary alone, but what matters for real life is how much cash you actually receive each paycheck — because that’s what funds rent, groceries, savings, and everything else.

This calculator is designed to be simple, transparent, and customizable. Instead of trying to replicate every country’s tax code, it uses an “effective rate” approach: you provide estimated percentages for federal, state, and local taxes (and optionally FICA). That lets you quickly model scenarios like: a raise, a bonus, switching states, changing retirement contributions, or moving from hourly to salary.

• Step 1 — Annualize gross pay. Salary is already annual. Hourly pay becomes annual using hours per week × 52.
• Step 2 — Annualize pre-tax deductions. 401(k) % is taken from gross. Health/other pre-tax items are per paycheck and multiplied by pay periods.
• Step 3 — Compute taxable income estimate. Taxable = max(0, Gross − PreTax).
• Step 4 — Estimate taxes. Tax = Taxable × (Fed% + State% + Local%). Add FICA if enabled.
• Step 5 — Apply after-tax deductions. These reduce what you take home but do not reduce taxable income.
• Step 6 — Net pay. Net = Gross − PreTax − Taxes − AfterTax.

• Annual gross (salary): Gross_annual = Salary
• Annual gross (hourly): Gross_annual = HourlyWage × HoursPerWeek × 52
• Pay periods per year: N = {52, 26, 24, 12}
• Annual pre-tax 401(k): 401k_annual = Gross_annual × (401k% / 100)
• Annual pre-tax health: Health_annual = HealthPerPay × N
• Annual other pre-tax: OtherPreTax_annual = OtherPreTaxPerPay × N
• Total pre-tax: PreTax = 401k_annual + Health_annual + OtherPreTax_annual
• Taxable income estimate: Taxable = max(0, Gross_annual − PreTax)
• Income tax estimate: IncomeTax = Taxable × ((Fed% + State% + Local%) / 100)
• FICA estimate (standard mode): FICA = Gross_annual × 0.0765
• After-tax deductions: AfterTax = AfterTaxPerPay × N
• Net annual: Net_annual = Gross_annual − PreTax − IncomeTax − FICA − AfterTax
• Net per paycheck: Net_perPay = Net_annual / N

Notice the key idea: pre-tax deductions reduce taxable income (so they can reduce income taxes), but after-tax deductions do not. That’s why two people with the same gross pay can have different net pay if one contributes more to retirement or has different benefit selections.

• Example A (Salary): $90,000 salary, biweekly (26), 401(k) 6%, health $150/paycheck, other pre-tax $0, after-tax $35/paycheck, federal 12%, state 5%, local 1%, FICA standard. This often lands around a ~70–78% “keep” rate depending on your inputs.
• Example B (Hourly): $28/hr, 40 hrs/week, weekly (52), no 401(k), health $0, federal 10%, state 0%, local 0%, FICA standard. This shows the classic surprise: even with low income tax, payroll taxes still reduce take-home pay.

Want the most accurate estimate? Use your most recent pay stub: enter your actual deductions, and estimate tax rates from “year-to-date taxes ÷ year-to-date taxable wages”. That turns this calculator into a near clone of your real paycheck math — but still easier to “what-if” different scenarios.

Frequently Asked Questions

• What is take-home pay?

  Take-home pay (net pay) is what you receive after payroll deductions. It’s typically gross pay minus taxes (income tax + payroll tax) minus benefits and other deductions.

• Why does this calculator ask for tax rates instead of filing status?

  This tool is built for speed and scenario testing. If you want a quick “net pay estimate” for an offer, entering effective rates is often faster and more flexible than modeling a full tax code.

• What tax rates should I use?

  If you have a pay stub, divide year-to-date taxes by year-to-date taxable wages (and convert to a percent). If you don’t, start with a conservative estimate (for many US earners: federal 10–22%, state 0–8%, local 0–3%) and refine after your first paycheck.

• Does 401(k) reduce my taxes?

  Pre-tax 401(k) contributions typically reduce taxable income for income tax calculations, which can increase take-home pay compared to the same savings done after-tax. (Roth contributions behave differently.)

• Is FICA always 7.65%?

  In many cases, employee payroll tax is 6.2% + 1.45% = 7.65%. Some situations vary, and additional Medicare rules can apply for higher incomes. If you want a simplified estimate, standard is fine; otherwise, choose “Custom rate” and enter your own.

• Can I use this to compare two job offers?

  Yes. Run it twice with each salary, benefits, and tax assumptions. Screenshot the breakdowns and compare net pay per year and per paycheck. This is one of the fastest ways to spot “same salary, different net pay.”

• What’s the difference between gross pay and net pay?

  Gross pay is the “before anything is taken out” amount. Net pay is what you keep after deductions and taxes. Your rent is paid with net pay — so net is the number that matters for budgeting.