Gross pay is the total you earn before anything is taken out. Net pay is what is left after taxes and deductions, the amount that actually reaches your bank account. When people compare gross pay vs net pay, the gap between them is made up of federal income tax, Social Security, Medicare, state and local taxes, and any benefits or savings you have signed up for.
Knowing both numbers matters. Your gross pay is what appears in a job offer and what lenders often ask about. Your net pay is what you can actually spend, save and budget with.
What counts as gross pay
Gross pay is every dollar of wages you earned during a pay period, before a single deduction. For a salaried worker, it is usually the annual salary divided by the number of paydays. For an hourly worker, it is hours worked times the hourly rate, plus any overtime.
Gross pay can also include:
- Overtime pay (for non-exempt workers, at least 1.5 times the regular rate for hours over 40 in a workweek under federal law)
- Bonuses and commissions
- Tips reported to your employer
- Holiday, vacation or sick pay
On your pay stub, gross pay is usually the first total you see, often next to a year-to-date (YTD) figure showing everything you have earned so far this year.
What counts as net pay
Net pay, often called take-home pay, is gross pay minus everything withheld. It is the figure on your direct deposit or paper check. If your employer deposits pay into more than one account, the amounts added together equal your net pay.
Net pay changes when anything between the two numbers changes: a raise, a new W-4, a different health plan, a bigger 401(k) contribution, or a move to another state.
What gets taken out between gross and net
Deductions fall into three groups. The order matters, because some deductions lower the pay that taxes are calculated on.
Pre-tax deductions
These come out before income tax is figured. Common examples are traditional 401(k) or 403(b) contributions, health, dental and vision premiums paid through a cafeteria plan, and HSA contributions. Traditional 401(k) contributions lower federal income tax but not Social Security or Medicare. Health premiums and HSA contributions through payroll generally lower both.
Taxes
- Federal income tax: based on your W-4, filing status and pay frequency, using IRS withholding tables.
- Social Security: 6.2% of wages up to $184,500 in 2026.
- Medicare: 1.45% of all wages, plus an extra 0.9% withheld on wages over $200,000 in a year.
- State and local income tax: depends on where you live and work. Nine states, including Texas and Florida, have no tax on wages.
After-tax deductions
These come out last and do not reduce your taxes. Examples include Roth 401(k) contributions, some life or disability insurance, union dues and wage garnishments.
For more on how the order affects your pay, see our guide to pre-tax vs after-tax deductions, and for the two payroll taxes, what FICA tax covers.
Worked example: $52,000 a year in North Carolina
Take a single filer earning $52,000 a year in North Carolina, paid biweekly (26 paychecks). Each paycheck starts at $2,000 gross. This worker contributes 4% to a traditional 401(k) and pays $90 per paycheck for health insurance. These are estimates from the PaycheckHubs paycheck calculator using 2026 figures and a standard W-4.
| Line | Per paycheck |
|---|---|
| Gross pay | $2,000.00 |
| 401(k) contribution (4%) | −$80.00 |
| Health insurance (pre-tax) | −$90.00 |
| Federal income tax | −$135.75 |
| Social Security | −$118.42 |
| Medicare | −$27.70 |
| North Carolina income tax | −$53.45 |
| Net pay | $1,494.68 |
Over a full year, that is $52,000 gross and about $38,862 net. Of the roughly $13,138 difference, $4,420 is not lost: it went into the 401(k) and toward health coverage. Taxes total about $8,718.
Notice that Social Security and Medicare are calculated on $1,910, not $2,000. The health premium reduced the pay subject to those taxes, but the 401(k) contribution did not.
Without the 401(k) and health deductions, the same $2,000 paycheck would net about $1,630.62. So the $170 in pre-tax deductions only shrank take-home pay by about $136, because they also lowered the taxes withheld. Run your own numbers on the North Carolina paycheck calculator.
Gross pay vs net pay: which number to use when
| Situation | Number to use | Why |
|---|---|---|
| Monthly budget | Net pay | It is the money you can actually spend. |
| Comparing job offers | Both | Gross shows the offer; net shows the effect of state taxes and benefit costs. |
| Loan or rental applications | Usually gross | Many applications ask for gross income; check what each one requests. |
| Retirement contribution percentages | Gross | 401(k) percentages are applied to gross pay. |
| Tax return | Gross wages from your W-2 | Box 1 shows taxable wages after pre-tax deductions. |
If you are moving or weighing an offer in another state, the gap between gross and net can shift a lot. A $52,000 salary in Florida loses no state income tax at all, while the same pay in a higher-tax state loses more. Our guide on how to calculate take-home pay walks through each step.
Why your net pay might not match what you expected
If your first paycheck looks smaller than you planned, the usual causes are:
- Benefit premiums or retirement contributions that started on your first day
- A W-4 that withholds more than a simple estimate assumes, for example if you checked the box for two jobs
- Local income tax, which some cities and counties charge on top of state tax
- State payroll items such as disability or paid family leave contributions
- A partial first pay period
Your pay stub lists each deduction separately. Our guide on how to read your pay stub explains every line.
Frequently Asked Questions
Is salary gross or net?
A quoted salary is gross pay. It is the amount before taxes and deductions, so your take-home pay will be lower.
Is the amount on my W-2 my gross pay?
Not always. Box 1 of the W-2 shows federal taxable wages, which is gross pay minus pre-tax deductions such as traditional 401(k) contributions and cafeteria-plan health premiums. That is why it is often lower than your salary.
How much lower is net pay than gross pay?
It depends on your income, filing status, state and benefits. In the North Carolina example above, net pay was about 75% of gross with retirement and health deductions, and about 82% without them.
Can I increase my net pay?
You can change your W-4, adjust voluntary deductions or choose different benefits, but lowering withholding too much can leave you owing tax at filing time. The IRS Tax Withholding Estimator can help you check.
Sources
- IRS Publication 15 (Circular E), Employer's Tax Guide
- IRS Topic 751: Social Security and Medicare Withholding Rates
- IRS Tax Withholding Estimator
- Tax Foundation: State Individual Income Tax Rates and Brackets, 2026
Run the numbers for your state
Written and checked against IRS, Social Security Administration and state tax agency publications for the 2026 tax year. General information, not tax, legal or financial advice. Read our editorial policy, calculation methodology and sources.