There is no disappointment quite like receiving your first real paycheck. You calculate your annual salary divided by 12, visualize the number... and then you open the envelope. It's significantly smaller. Welcome to the world of Gross vs. Net.
See Your Real Take-Home Pay
Don't wait for payday to be surprised. Use our Salary Calculator to estimate your taxes and deductions.
Calculate Now1. Gross Pay: The Vanilla Number
Gross Pay is the big number in your offer letter. It's what you earn before the government, your insurance company, and your retirement fund get their hands on it. It's a theoretical number—a promise of what you would have if society didn't cost money.
2. The Big Three Deductions
Where does it go? Usually to three main buckets:
- Taxes: Federal, State, and sometimes Local. This is the price of civilization (roads, schools, defense).
- FICA: Social Security and Medicare. This is you paying for your future self (and current retirees).
- Benefits: Health insurance, 401(k) contributions, FSA/HSA. This is you paying for your health and wealth.
3. The 401(k) Paradox
Contributing to a 401(k) reduces your Net Pay today, but it can actually increase your efficiency. Since 401(k) contributions are often pre-tax, they lower your taxable income. You might put $100 into your 401(k), but your paycheck only drops by $75 because you saved $25 in taxes. It's free money... assuming you don't need it until you're 60.
4. Withholding Allowances (W-4)
This is where many people mess up. If you withhold too much, you get a big refund in April. That feels good, but it's actually an interest-free loan you gave to the government. If you withhold too little, you owe money in April. Ideally, you want to break even.
5. Net Pay: The Reality
Net Pay is what hits your bank account. This is your budget. Never budget based on Gross Pay. You will run out of money. A safe rule of thumb for quick estimation is that Net Pay is roughly 70-75% of Gross Pay, though this varies wildly by location and income level.
Plan Your Budget with Real Numbers
Stop guessing. Input your gross salary into our calculator to see a breakdown of where every dollar goes.