The difference between gross and net pay is what gets subtracted in between: gross pay is everything you earn in a pay period before any withholdings, and net pay is what remains after taxes, benefit premiums, and any other deductions come out. On a $52,000 salary paid every two weeks, gross pay is $2,000 per check, but the amount deposited in your account will be meaningfully smaller once federal and state taxes, Social Security, Medicare, and any elected benefits are removed.
What Counts as Gross Pay
Gross pay is your total compensation for a pay period before anything is withheld. For salaried workers, it’s the annual salary divided by the number of pay periods. For hourly workers, it’s the hourly rate multiplied by hours worked, so $25 an hour for 40 hours produces $1,000 in gross pay.
Overtime is part of gross pay too. Under federal law, non-exempt employees who work more than 40 hours in a workweek earn at least one and a half times their regular hourly rate for every extra hour.1eCFR. 29 CFR Part 778 – Overtime Compensation Bonuses, commissions, tips, and shift differentials all fold into gross pay as well.
Gross pay matters outside the paycheck. Mortgage lenders and credit card companies typically use gross income, not net, when calculating your debt-to-income ratio for a loan application. You’ll find the number near the top of your pay stub.
What Gets Taken Out to Reach Net Pay
Some deductions are required by law. Others you elect. Together they explain the gap between what your employer pays and what you take home.
Federal Income Tax
Your employer withholds federal income tax based on the information you provide on Form W-4 when you start a job.2Internal Revenue Service. Form W-4 (2026) Employee’s Withholding Certificate The amount depends on your income, filing status, and any adjustments you claimed. For 2026, federal rates range from 10 percent on the first $12,400 of taxable income for single filers up to 37 percent on income above $640,600.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 These rates apply in layers: only the income within each bracket is taxed at that bracket’s rate, not your whole paycheck.
Social Security and Medicare
The Federal Insurance Contributions Act requires two separate withholdings from every paycheck. Social Security tax is 6.2 percent of gross pay, and Medicare tax is 1.45 percent, a combined 7.65 percent.4Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Your employer pays a matching 7.65 percent on top of that, but only your share appears on your pay stub.
Social Security tax stops applying once your year-to-date earnings pass $184,500 in 2026, which gives higher earners slightly larger paychecks late in the year.5Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Medicare has no wage cap. If your annual wages exceed $200,000, an extra 0.9 percent Additional Medicare Tax kicks in on every dollar above that threshold; your employer starts withholding it once your pay crosses $200,000 in a calendar year regardless of filing status, and any difference gets settled on your tax return.6Internal Revenue Service. Topic No. 560, Additional Medicare Tax
State and Local Taxes
Many states impose their own income tax that your employer also withholds. Rates and structures vary widely. Some states use a flat rate, others have graduated brackets, and a handful have no state income tax at all. Certain cities and counties add local income taxes on top. A growing number of jurisdictions also require payroll deductions for state disability insurance or paid family leave, with employee-paid rates typically ranging from a fraction of a percent to just over one percent of covered wages.
Retirement Contributions
Pre-tax contributions to a 401(k) or 403(b) plan come out of gross pay before federal income tax is calculated, which lowers your taxable income for the year.7Internal Revenue Service. Retirement Topics – Contributions For 2026, you can defer up to $24,500 through salary contributions, with additional catch-up amounts available starting at age 50.8Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 If your plan offers a Roth option, contributions come out after taxes instead; your net pay drops by the same dollar amount, but qualified withdrawals in retirement are tax-free.
Health Insurance and Related Benefits
Premiums for employer-sponsored medical, dental, and vision coverage are among the most common voluntary deductions. Most employer plans deduct these on a pre-tax basis, reducing taxable income the same way a traditional 401(k) contribution does. Covering dependents raises the premium and the deduction.
Health savings accounts offer another pre-tax deduction if you’re enrolled in a qualifying high-deductible plan. The 2026 contribution limits are $4,400 for individual coverage and $8,750 for family coverage.9Internal Revenue Service. Notice 2026-05, Expanded Availability of Health Savings Accounts Health care flexible spending accounts allow pre-tax contributions up to $3,400 in 2026.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Life insurance, disability insurance, and commuter benefits can also appear as payroll deductions.
Working the Math on a Sample Paycheck
Net pay is gross pay minus every deduction, mandatory and voluntary combined. Say your gross pay for a period is $3,000. Federal income tax takes $350, Social Security $186, Medicare $43.50, state tax $100, a 401(k) contribution $150, and a health insurance premium $120. Net pay comes to $2,050.50. That’s the number that reaches your bank account.
Because so many variables affect net pay, two coworkers earning the same salary can take home very different amounts. One might contribute heavily to a 401(k) and cover a family health plan; the other might make no retirement contributions and only insure themselves. The gap can run several hundred dollars per paycheck. Building your monthly budget around net pay, not gross, keeps you from committing to expenses your take-home won’t actually cover.
When Deductions Aren’t Your Choice
Sometimes deductions appear on your pay stub that you didn’t elect. If a court orders a wage garnishment for unpaid debt, your employer must withhold a portion of your pay and send it to the creditor. For ordinary consumer debts like credit cards, medical bills, and personal loans, federal law caps the garnishment at the lesser of 25 percent of your disposable earnings or the amount by which your weekly disposable earnings exceed 30 times the federal minimum wage.10U.S. Department of Labor. Fact Sheet #30: Wage Garnishment Protections of the Consumer Credit Protection Act (CCPA)
Child support and alimony orders allow larger garnishments, with caps ranging from 50 to 65 percent of disposable earnings depending on whether you’re supporting another spouse or child and whether the order covers payments more than 12 weeks overdue.11Office of the Law Revision Counsel. 15 U.S. Code 1673 – Restriction on Garnishment When multiple orders exist, child support and alimony take priority over consumer debts. If a support order already claims 25 percent or more of your disposable earnings, a commercial creditor generally cannot garnish anything additional.
If Your Net Pay Doesn’t Look Right
Compare each line on your pay stub against what you expect. Check that gross pay matches your agreed-upon rate and hours, that your W-4 elections are reflected, and that no unfamiliar deductions have appeared. Federal law requires your employer to keep detailed payroll records, including pay rate, hours, all deductions, and total wages, for at least three years.12U.S. Department of Labor. Fact Sheet #21: Recordkeeping Requirements Under the Fair Labor Standards Act (FLSA) You have the right to request this information.
If a conversation with payroll doesn’t resolve the issue, you can file a complaint with the Department of Labor’s Wage and Hour Division by calling 1-866-487-9243.13U.S. Department of Labor. How to File a Complaint Complaints are kept confidential, and your employer is prohibited from retaliating against you for filing one. Gather your pay stubs, time records, and any written communications about your pay before reaching out.
A Note for the Self-Employed
If you work as an independent contractor or freelancer, this gross-versus-net framework works differently for you. Clients pay you the full gross amount, and you’re responsible for handling your own taxes, including both halves of FICA at a combined self-employment tax rate of 15.3 percent.14Social Security Administration. Contribution and Benefit Base Setting aside a portion of each payment for quarterly estimated taxes takes the place of employer withholding.15Internal Revenue Service. Topic No. 554, Self-Employment Tax