1. Understanding Gross vs Net Pay
In payroll, "Gross Pay" is the total amount of money you are paid by your employer before any deductions are made. "Net Pay", often referred to as "take-home pay", is the actual amount of money you receive in your paycheck after all taxes, benefits, and voluntary deductions are removed.
CHECK OUT OUR SALARY CALCULATOR2. What Are Payroll Taxes?
Your paycheck is typically reduced by several mandatory taxes:
- Federal Income Tax: The amount sent to the federal government. This rate depends on your W-4 status and tax brackets.
- State Income Tax: Collected by your specific state (though some states, like Texas or Florida, do not have state income tax).
- FICA (Social Security & Medicare): In the US, employees pay 6.2% for Social Security and 1.45% for Medicare, resulting in a combined standard FICA rate of 7.65%.
3. Voluntary Deductions
Beyond taxes, many employees opt into "pre-tax" or "post-tax" deductions. Pre-tax deductions, like contributions to a traditional 401(k) retirement plan or health insurance premiums, are removed from your gross pay before taxes are calculated, which can actually lower your overall tax burden. This calculator helps you see how these subtractions impact the money you take home every pay period.