Gross pay is the total amount you earn before any taxes or deductions come out. Think the salary figure your offer letter quotes, or the total at the top of a pay stub. Net pay, also called take-home pay, is what’s left after taxes and other deductions come out. That’s the amount your bank account actually receives. The IRS’s own tax education materials define it exactly this way: gross pay is the amount the employee earns, and net pay is the amount the employee actually receives.

The gap between the two can be substantial. A $65,000 gross salary commonly nets somewhere in the neighborhood of $50,000 to $52,000 after typical federal, state, and payroll tax withholding. The exact number depends heavily on your state, filing status, and specific deductions. This gap surprises a lot of people who compare a job offer’s headline number to what they’ll actually see in their account.

Federal income tax withholding is usually the largest single deduction. Your income and the information you provide on Form W-4 determine the amount. FICA taxes come next. That’s 6.2% for Social Security, up to an annual wage cap that adjusts each year, plus 1.45% for Medicare, with no cap. Combined, that’s 7.65% that applies to nearly every paycheck regardless of income level. On a $2,500 biweekly gross paycheck, FICA alone takes out about $191.25 before anything else comes out.

State income tax withholding comes next where applicable. A handful of states, including Texas, Florida, and Washington, don’t levy a state income tax at all. That’s part of why identical gross salaries can produce noticeably different take-home pay depending purely on where you live and work. Local taxes, common in some cities and counties, can add yet another layer on top of federal and state withholding. For residents of those specific areas, that widens the gap between gross and net pay even further.

Not every deduction works the same way for tax purposes, and the distinction matters for your take-home number. Pre-tax deductions, like traditional 401(k) contributions, health insurance premiums, and HSA contributions, come out of your paycheck before income tax applies. That lowers your taxable income and therefore your tax bill, alongside reducing your net pay by the deducted amount itself.

Post-tax deductions, like Roth 401(k) contributions or wage garnishments, come out after tax already applied to the full amount. So they reduce net pay without providing any offsetting reduction in taxable income. Here’s why that matters: increasing a traditional 401(k) contribution by $100 typically reduces your actual take-home pay by less than $100. A chunk of that $100 would have gone to taxes anyway.

Two people earning the identical gross salary can see meaningfully different net pay if they’ve filled out their W-4s differently. One might have more withheld throughout the year than the other. Your salary alone doesn’t fix the amount of federal tax withheld from each paycheck. It also depends on the information you provide on Form W-4, including your filing status, whether you hold multiple jobs, and any dependents you claim.

Over-withholding leads to a larger tax refund the following spring, effectively an interest-free loan to the government throughout the year. Under-withholding means a smaller refund, or a balance you owe, at tax time. Neither is automatically wrong. Adjusting your W-4 using the IRS’s Tax Withholding Estimator can bring your paycheck withholding closer to your actual annual tax liability. That avoids a large surprise refund or bill.

A major life event can prompt this: marriage, a new child, a second job, or a significant change in income. Any of these are generally a good reason to revisit your W-4. The form should reflect your current situation, rather than something you fill out once and forget for the rest of your career.

A job offer with a higher gross salary doesn’t automatically mean more take-home pay. It might come with a move to a higher-tax state. It might come with fewer employer-subsidized pre-tax benefits, or a less generous health insurance contribution that increases your own premium deduction. Comparing two offers purely on their gross salary figure can miss real differences. Those differences only show up once you calculate the actual net pay each one would produce.

This is especially relevant for remote positions or relocations. The same gross salary can produce a meaningfully different net paycheck, based purely on which state’s tax rules apply. Cost-of-living differences between the two locations pile on top of that. Take a $5,000 gross raise that comes with a move from a no-income-tax state to one with a high marginal rate. Once you factor in the new state tax withholding, that raise can end up producing very little additional take-home pay. The headline salary number can look like a clear improvement even when it isn’t.

Building a budget, or applying a framework like the 50/30/20 rule, around gross salary rather than net pay overstates how much money is actually available. Taxes and deductions are already gone before that money ever reaches your account. Every serious budgeting approach starts from take-home pay, not the headline salary figure, for exactly this reason.

This mistake is especially common right after a raise or a new job. It’s tempting to budget around the new, higher gross figure before actually seeing what it translates to in take-home terms. Wait for a real paycheck, or run the numbers through a calculator first. That avoids overcommitting to new expenses based on a number that was never going to fully reach your bank account in the first place.

The exact gap between gross and net pay depends on your specific salary, state, filing status, and deductions. Our Take-Home Pay Calculator estimates your net paycheck after typical deductions, giving you a realistic number to budget around instead of your gross salary alone.