How to Calculate Net Pay (Take-Home Pay) from Gross Pay

Net pay is what lands in your bank account: gross pay minus pre-tax deductions, federal income tax, Social Security and Medicare, state and local taxes, and post-tax deductions. For a single filer earning $65,000 a year, paid every two weeks, with a 5% 401(k) contribution and $100 per paycheck in health premiums, take-home pay works out to about $1,902 per paycheck in a state with no income tax. The order of the steps matters, because some deductions reduce some taxes but not others.

The net pay formula

Each piece has its own base:

Step 1: Start with gross pay for the period

For salaried employees, divide annual salary by the number of pay periods: 52 (weekly), 26 (biweekly), 24 (semimonthly) or 12 (monthly). For hourly workers, multiply hours by the rate and add overtime, shift differentials and any bonuses or commissions. The gross pay calculator handles both cases.

Example: $65,000 ÷ 26 = $2,500.00 gross per biweekly paycheck.

Step 2: Subtract pre-tax deductions

Pre-tax deductions come out before income tax is figured. The two common types are treated differently for FICA:

• Traditional 401(k), 403(b) or 457(b) deferrals reduce income tax wages but not Social Security and Medicare wages.
• Section 125 cafeteria plan items (health, dental and vision premiums, health FSA, HSA contributions made through payroll) reduce income tax and FICA wages.

Example: 5% to a traditional 401(k) is $125.00, and health premiums are $100.00.

• Federal income tax wages: $2,500 − $125 − $100 = $2,275.00
• FICA wages: $2,500 − $100 = $2,400.00

Step 3: Estimate federal income tax withholding

Employers use the percentage method or wage-bracket tables in IRS Publication 15-T, driven by your Form W-4. A close estimate is to annualize the taxable wages, subtract the standard deduction, apply the 2026 brackets and divide back by the number of paychecks.

For 2026 the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, and the single brackets start at 10% up to $12,400, 12% up to $50,400 and 22% up to $105,700 (IRS Rev. Proc. 2025-32).

Example:

1. Annual taxable wages: $2,275 × 26 = $59,150
2. Less standard deduction: $59,150 − $16,100 = $43,050
3. Tax: 10% × $12,400 = $1,240.00, plus 12% × ($43,050 − $12,400) = $3,678.00, total $4,918.00
4. Per paycheck: $4,918 ÷ 26 = $189.15

Publication 15-T builds the standard deduction into its percentage-method tables, so for a 2020-or-later W-4 with no extra entries it gives a very similar figure. Claiming dependents, other income or extra withholding on the W-4 changes it. To see where these brackets come from, read marginal vs. effective tax rate.

Step 4: Calculate Social Security and Medicare (FICA)

Example: $2,400 × 6.2% = $148.80 Social Security, and $2,400 × 1.45% = $34.80 Medicare, for $183.60 total.

Social Security stops once your year-to-date wages pass $184,500 in 2026, so high earners see a raise in net pay late in the year. Medicare has no cap, and wages above $200,000 add 0.9% Additional Medicare Tax withholding.

Step 5: Subtract state and local taxes

Nine states have no tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Others use a flat rate or graduated brackets, and some cities and counties add a local income tax. A few states also withhold for disability insurance or paid family leave. Most states follow the federal treatment of 401(k) deferrals, but not all do; Pennsylvania, for example, taxes them. The paycheck calculator applies each state’s rules.

Example: in a no-tax state, $0. With a hypothetical 4% flat state tax on $2,275, it would be $91.00.

Step 6: Subtract post-tax deductions

These come out after every tax is figured: Roth 401(k) contributions, after-tax life or disability insurance, wage garnishments, union dues and charitable payroll gifts. The example has none.

Putting the example together

Net pay is about 76% of gross in the no-tax state. Remember that the $125 in the 401(k) is still your money, just set aside for retirement.

A quick hourly example

A single worker earns $22 an hour for 40 hours a week, paid weekly, with no pre-tax deductions:

• Gross: 40 × $22 = $880.00
• Federal income tax: ($880 × 52 − $16,100) = $29,660 taxable; tax $3,311.20 a year, or about $63.68 a week
• FICA: $880 × 7.65% = $67.32
• Net pay (no state tax): $880.00 − $63.68 − $67.32 = $749.00

If the job includes overtime, compute gross pay with the overtime premium first; see how to calculate time and a half.

Why your actual paycheck may differ

• W-4 choices. Step 3 dependents reduce withholding; Step 4(c) extra withholding raises it.
• Pay-period rounding. Payroll systems round each line to the cent, and table methods use wage brackets.
• Supplemental pay. Bonuses may be withheld at a flat 22%, which can make a bonus check look over-taxed.
• Year-to-date limits. The Social Security wage base and 401(k) limits ($24,500 for 2026, plus catch-up if eligible) can stop deductions mid-year.
• Withholding is not your final tax. Credits, other income and itemized deductions are settled when you file, which is why refunds and balances due happen.

To convert between pay rates before you start, use the salary to hourly calculator or read how to convert salary to hourly. For a full gross-to-net breakdown in one step, the payroll calculator shows each line.

This guide is a simplified estimate for general education, not tax or financial advice. Withholding follows your Form W-4, IRS Publication 15-T and state rules; check your pay stub and consult a tax professional for your situation.