To calculate take home pay, start with your gross pay and subtract pre-tax deductions (like a 401k), then FICA taxes, then federal income tax, then state and local tax, and finally any post-tax deductions. What is left is your net pay, the amount that actually hits your bank account. This guide walks the full gross-to-net formula with a real worked example, then shows how the math shifts when you live or work in another country.
Most people learn how to calculate take home pay the hard way: they accept a $70,000 offer, picture roughly $5,800 a month, and then stare at a first paycheck closer to $4,300. The gap is not a mistake. It is the stack of deductions sitting between gross pay and net pay, and once you understand the order they come out in, the number stops being a surprise.
What Is Take-Home Pay (Net Pay vs Gross Pay)?#
Take-home pay is your gross pay minus every deduction your employer and your government take out before the money reaches you. Gross pay is the headline number on your offer letter. Net pay is what you can actually spend, save, or use to pay rent.
The two are never the same, and the difference is bigger than most people expect. Depending on your income, location, and benefit choices, your take-home pay typically lands somewhere between 60% and 80% of gross. The exact figure depends on the deductions below.
Quick rule of thumb: for a middle US income with standard withholding and no state income tax, plan for take-home pay around 75% to 80% of gross. In a high-tax state or a high-tax country, it can drop well below 70%.
The deductions that sit between gross and net#
Every paycheck runs your gross pay through the same gauntlet, roughly in this order:
- Pre-tax deductions: 401k or pension contributions, traditional HSA/FSA, some health insurance premiums. These come out before tax is calculated, which lowers your taxable income.
- FICA taxes (US): Social Security and Medicare, a flat payroll tax most US workers cannot avoid.
- Federal income tax: based on your taxable income and marginal tax bracket.
- State and local income tax: varies wildly, from 0% in places like Texas to over 10% at the top end in California.
- Post-tax deductions: Roth 401k, after-tax insurance, union dues, garnishments.
The order matters. Pre-tax deductions shrink the income that gets taxed, so a dollar into a traditional 401k costs you less than a dollar of take-home pay.
How to Calculate Take Home Pay: The Formula#
Here is the formula in plain terms. Work top to bottom and do not skip the pre-tax step, because it changes every number underneath it.
Gross pay
− Pre-tax deductions (401k, HSA, some insurance)
= Taxable income
− FICA (Social Security + Medicare)
− Federal income tax
− State / local income tax
− Post-tax deductions
= Take-home (net) pay
The single most common mistake is taxing the full gross. If you put 6% into a 401k, you are not taxed on that 6%, so your federal and state tax are calculated on the smaller taxable-income figure, not on gross.
The numbers you need before you start#
You cannot do this in your head without a few inputs. Gather these first:
- Gross salary (annual) and your pay frequency (monthly, biweekly, weekly).
- Pre-tax contribution rate (your 401k or pension percentage).
- Filing status (single, married, etc., if you are in the US).
- State or country of work, which sets the local tax rate.
- Any fixed post-tax deductions you already know about.
If you would rather skip the manual math, the free salary and take-home pay calculator does the full stack for 9 countries in one screen. But it is worth walking through the long way once so you understand what the tool is doing.
A Worked Example (US, $70,000 Salary)#
Numbers make this concrete. Take a single filer earning $70,000 a year in a state with no income tax, contributing 6% to a traditional 401k. We will use round, approximate rates so the logic is clear. Treat these as illustrative, not tax advice for your exact situation.
Step 1: Start with gross pay#
Gross annual salary is $70,000. That is the figure on the offer letter and the number everyone quotes at parties. It is also the last time the math is simple.
Step 2: Subtract pre-tax deductions#
A 6% traditional 401k contribution is $70,000 × 0.06 = $4,200. Subtract it:
$70,000 − $4,200 = $65,800 taxable income.
This is the figure the tax calculations use from here on. The $4,200 still belongs to you, it just sits in your retirement account instead of your checking account, untaxed for now.
Step 3: Subtract FICA (Social Security + Medicare)#
FICA is calculated on gross wages, not on your reduced taxable income (a detail many people get wrong). The 2026 employee rates are 6.2% for Social Security and 1.45% for Medicare, a combined 7.65%.
$70,000 × 0.0765 = $5,355 in FICA.
Heads up: FICA ignores your 401k. Pre-tax retirement contributions lower your income tax, but Social Security and Medicare are still taxed on the full gross. This is why FICA feels unavoidable, because it mostly is.
Step 4: Subtract federal income tax#
Federal tax is progressive, so you do not pay your top marginal tax bracket rate on every dollar. After the standard deduction, taxable income for a single filer at this level lands the effective federal rate in roughly the 9% to 11% range. Using about 10% of the $65,800 taxable income for illustration:
Approximately $6,600 in federal income tax.
The key concept is effective vs marginal rate. You might be "in the 22% bracket," but your effective rate (total tax divided by income) is far lower because the first chunks of income are taxed at 0%, 10%, and 12%.
Step 5: Subtract state and local tax#
Our example uses a no-income-tax state (think Texas, Florida, Washington), so state income tax here is $0. In California or New York, this line could easily add another $3,000 to $4,500 at this income, dropping take-home pay noticeably.
Step 6: Add it up#
| Line item | Amount |
|---|---|
| Gross salary | $70,000 |
| − 401k (pre-tax) | −$4,200 |
| − FICA (7.65%) | −$5,355 |
| − Federal income tax (~10% effective) | −$6,600 |
| − State income tax | −$0 |
| Take-home pay | ≈ $53,845/year |
That is about $4,487 per month, or roughly 77% of gross. Notice the 401k money is not "lost," it is saved, so your actual spendable plus saved total is higher than the take-home line alone.
How Take-Home Pay Changes Across Countries#
This is where most US-centric guides leave remote workers and expats stranded. The gross-to-net formula is universal, but the deductions inside it are not. The same $70,000 gross produces very different take-home pay depending on the country, because the tax-and-social-contribution stack changes shape.
The structure differs in three big ways:
- What the payroll tax is called and how big it is. The US has FICA (7.65%). The UK has National Insurance. Germany has social contributions for pension, health, unemployment, and care that are far heavier than US FICA. Australia funds Medicare through a levy.
- How progressive the income tax is. Some countries hit middle incomes harder; others tax less but charge high consumption tax (VAT) you never see on your payslip.
- Whether there is a separate state or provincial layer. The US and Canada add a state/provincial tax on top of federal. The UK does not split it that way.
Here is how the shape of take-home pay tends to compare for a single, average earner. These are directional ranges to illustrate the pattern, not precise figures for your salary:
| Country | Main payroll/social tax | Typical take-home as % of gross |
|---|---|---|
| United States (no-tax state) | FICA 7.65% | ~75-80% |
| United States (high-tax state) | FICA + state | ~68-74% |
| United Kingdom | National Insurance + income tax | ~68-75% |
| Canada | CPP + EI + provincial tax | ~68-76% |
| Germany | Heavy social contributions + income tax | ~55-65% |
| Australia | Medicare levy + income tax | ~70-76% |
The takeaway for anyone weighing a remote role or a relocation: a higher gross in a high-deduction country can leave you with less net pay than a lower gross in a low-tax one. Always compare take-home, never headline gross.
Because the rates, brackets, and contribution rules change every year and differ by country, doing this by hand for a foreign payslip is genuinely hard. The salary calculator handles the country-specific stack for the US, UK, Canada, Germany, Australia, and more, so you can compare offers on a net-pay basis instead of guessing.
Common Take-Home Pay Mistakes#
Even people who know the formula trip on the same few things. Avoid these and your estimate will be close.
- Taxing the full gross instead of taxable income. Pre-tax deductions come out first. Forgetting them overstates your tax and understates your take-home.
- Confusing marginal and effective rate. Being "in the 24% bracket" does not mean 24% of your income vanishes. Your effective rate is almost always lower.
- Forgetting FICA is separate. It is on top of income tax, calculated on gross, and easy to leave out of a quick mental estimate.
- Ignoring the state layer. Two identical $90,000 offers in different states can differ by hundreds of dollars a month in net pay.
- Comparing offers by gross. A raise that bumps you into a higher bracket still increases your take-home, but not by the full headline amount. Always model the net.
If you are negotiating an offer, run the net-pay number before you say yes. A signing bonus, a 401k match, or a move to a no-income-tax state can change the real value more than a few thousand on the gross. Our guide on how to use a salary calculator to negotiate your worth walks through framing those numbers in a conversation.
How to Estimate Take-Home Pay in Under a Minute#
If you just need a fast, defensible estimate, here is the short path:
- Take your gross salary and subtract your annual pre-tax contributions (401k, pension).
- Multiply gross by 0.0765 for FICA if you are in the US.
- Apply your effective income-tax rate (roughly 8% to 14% federal for most middle US incomes, plus any state rate).
- Subtract those from gross. The result is your approximate take-home pay.
For anything precise, an offer comparison, a relocation, or a foreign payslip, plug the real numbers into the take-home pay calculator. It applies current brackets, FICA, and country-specific social contributions automatically. If you also want to model a bonus or a side income against the right brackets, the tax calculator breaks down the income-tax portion in more detail.
Frequently Asked Questions#
How do I calculate take home pay from my gross salary? Subtract deductions in order: pre-tax contributions (like a 401k) first, then FICA, then federal income tax, then state and local tax, then any post-tax deductions. What remains is your take-home (net) pay. For most middle US incomes that works out to roughly 75% to 80% of gross in a no-income-tax state, and lower where state tax applies.
What percentage of my paycheck do I actually keep? For a typical US worker, take-home pay usually falls between 70% and 80% of gross, depending on your income level, filing status, retirement contributions, and state. In high-tax US states or high-contribution countries like Germany, it can drop to the 55% to 68% range. Run your exact numbers through a calculator for a reliable figure.
Is FICA calculated before or after my 401k contribution? FICA (Social Security and Medicare) is calculated on your full gross wages, not on your reduced taxable income. Your traditional 401k contribution lowers your federal and state income tax, but it does not reduce the FICA you owe. This is why pre-tax retirement savings cut your income tax but not your payroll tax.
What is the difference between net pay and gross pay? Gross pay is your total salary before any deductions, the number on your offer letter. Net pay (take-home pay) is what is left after pre-tax deductions, FICA, income tax, state tax, and post-tax deductions are removed. Net pay is the amount that actually reaches your bank account.
Why is my take-home pay different in another country on the same salary? The gross-to-net formula is the same everywhere, but the deductions inside it change. Payroll/social taxes, income-tax brackets, and whether there is a state or provincial layer all vary by country. The same gross can leave you with very different net pay, which is why you should always compare job offers on take-home pay rather than the headline gross figure.
Does a raise that pushes me into a higher tax bracket lower my take-home pay? No. Income tax is progressive, so only the income above the bracket threshold is taxed at the higher marginal rate. A raise always increases your take-home pay, just not by the full headline amount. The fear of "losing money" by earning more is a common myth based on confusing the marginal rate with the effective rate.
