What Is Net Pay (Take-Home Pay)?
Quick Answer
Net pay is the amount of money you actually receive in your paycheck after all taxes and deductions are subtracted from your gross pay. Also called take-home pay, this is the number that hits your bank account on payday. For most workers, net pay is 25-35% less than gross pay, depending on your tax bracket, state, and deductions.
How Net Pay Is Calculated
Net pay starts with your gross pay and subtracts every withholding and deduction. The formula is simple:
Gross Pay - Taxes - Deductions = Net Pay
The deductions fall into two main groups:
Mandatory Deductions (Taxes)
- Federal income tax: Based on your tax bracket and W-4 elections
- State income tax: Varies by state; some states like Texas and Florida charge zero
- Social Security tax: 6.2% of wages up to $176,100 in 2025
- Medicare tax: 1.45% of all wages, plus an additional 0.9% on earnings above $200,000
- Local taxes: Some cities and counties impose local income taxes
Voluntary Deductions
- 401(k) or 403(b) contributions
- Health, dental, and vision insurance premiums
- HSA or FSA contributions
- Life insurance or disability insurance
- Union dues
Real Example With Actual Numbers
Michael earns $85,000 per year in California. He is single, contributes 5% to his 401(k), and pays $150 per paycheck for health insurance. Here is his biweekly breakdown:
| Item | Amount |
|---|---|
| Gross pay (biweekly) | $3,269.23 |
| Federal income tax | -$420.00 |
| California state tax | -$185.00 |
| Social Security (6.2%) | -$202.69 |
| Medicare (1.45%) | -$47.40 |
| CA SDI (1.1%) | -$35.96 |
| 401(k) (5%) | -$163.46 |
| Health insurance | -$150.00 |
| Net pay | $2,064.72 |
Michael keeps about 63% of his gross pay. Someone earning the same salary in Texas would take home roughly $200 more per paycheck because there is no state income tax. Use the SalaryHog calculator to compare your own numbers, or try the state relocation tool to see the difference a move could make.
Why Net Pay Varies So Much
Two people earning the same $85,000 salary can have very different net pay amounts. The biggest factors are:
- State of residence: The gap between high-tax states and no-tax states can be over $5,000 per year
- Filing status: Married filing jointly often results in lower tax rates than single filing
- Pre-tax deductions: Higher 401(k) contributions and HSA contributions lower your taxable income, which counterintuitively means less tax is withheld
- W-4 elections: How you fill out your W-4 form directly controls how much federal tax is withheld each paycheck
What to Do With This Number
Your net pay is the real number for budgeting. When calculating whether you can afford rent or planning monthly expenses, always use net pay — not your gross salary. Financial advisors generally recommend spending no more than 30% of your net pay on housing.
Want to see your estimated net pay instantly? Plug your salary into the SalaryHog calculator and get a complete breakdown for your state.