Gross vs Net Pay: Difference, Formulas & Examples
Gross pay is what you earn before any deductions; net pay is what actually reaches your bank account after taxes, FICA and benefit deductions. For US employees the gap is typically 15% to 30% of gross.
Gross pay is everything you earn before deductions; net pay is what reaches your bank account after taxes and withholdings. For most US employees the gap is 15%–30% of gross, depending on income, filing status, state and benefit choices.
The net pay formula
- Pre-tax deductions: traditional 401(k), HSA, FSA and most health premiums — they lower taxable income.
- Taxes: federal income tax, Social Security 6.2%, Medicare 1.45%, plus state and local income tax.
- Post-tax deductions: Roth 401(k), wage garnishments, union dues, some insurance.
Gross vs net: key differences
| Gross pay | Net pay | |
|---|---|---|
| Definition | Total earnings before deductions | Earnings after all deductions |
| Includes | Salary, hourly wages, overtime, bonuses, commissions | What is deposited to your account |
| Where it appears | Offer letter, W-2 Box 3 and Box 5 | Pay stub "net pay" line |
| Used for | Loan and rent applications, salary comparisons | Budgeting and everyday spending |
Example: $70,000 salary in 2026
A single filer earning $70,000 takes the 2026 standard deduction of $16,100, leaving $53,900 of federally taxable income. Assuming a 5% state income tax and no pre-tax deductions:
| Item | Annual | Per biweekly paycheck |
|---|---|---|
| Gross pay | $70,000 | $2,692 |
| Federal income tax | −$6,570 | −$253 |
| Social Security (6.2%) | −$4,340 | −$167 |
| Medicare (1.45%) | −$1,015 | −$39 |
| State income tax (est. 5%) | −$3,500 | −$135 |
| Net pay (est.) | ≈ $54,575 | ≈ $2,099 |
Net pay here is about 78% of gross. Contributing 6% to a traditional 401(k) would lower take-home pay by less than the $4,200 contributed, because it also reduces federal and state income tax. In a no-income-tax state such as Texas or Florida, the same salary nets about $3,500 more.
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Open the calculatorFrequently asked questions
Is my salary gross or net?
An advertised salary is almost always gross — the amount before taxes and deductions. Net pay is what actually reaches your bank account.
How do I calculate net pay from gross pay?
Subtract pre-tax deductions, then federal income tax, FICA (7.65%), state and local tax, and finally post-tax deductions such as Roth contributions.
What percentage of gross pay is net pay?
Most US workers keep about 70%–85% of gross pay. Higher earners and residents of high-tax states keep less; workers in no-income-tax states keep more.
Which number goes on a loan or rental application?
Lenders and landlords usually ask for gross income. Use net pay for your own budget, since that is the money you can actually spend.