If you have ever been surprised that your paycheck is smaller than your hourly rate suggests, the difference is deductions. Here is what separates gross pay from the net pay that actually reaches your bank account.
What is gross pay?
Gross pay is your total earnings for a pay period before any deductions. For an hourly worker it is your hours worked multiplied by your rate, plus any overtime, bonuses, or shift differentials. Our time card and overtime calculators both report gross pay.
What is net pay?
Net pay — also called take-home pay — is what remains after all mandatory and voluntary deductions are subtracted from your gross pay. It is the amount printed on your check or deposited to your account.
The deductions in between
- Federal income tax — withheld based on your W-4 and income.
- Social Security tax — 6.2% of wages up to the annual wage base.
- Medicare tax — 1.45% of all wages (with an additional 0.9% on high earners).
- State and local income tax — varies by state; some states have none.
- Voluntary deductions — health insurance premiums, 401(k) contributions, and similar.
Example paycheck
Imagine a weekly gross pay of $800. A rough breakdown might look like this (your actual withholding will differ):
| Line item | Amount |
|---|---|
| Gross pay | $800.00 |
| Social Security (6.2%) | −$49.60 |
| Medicare (1.45%) | −$11.60 |
| Federal income tax (est.) | −$70.00 |
| Net pay (approx.) | $668.80 |
Why it matters
Budgeting from gross pay is a common mistake. Because 15–30% (or more) of gross pay often goes to taxes and benefits, planning around your net figure gives a far more realistic picture of your monthly cash flow.
Frequently Asked Questions
What is the difference between gross and net pay?
Gross pay is your total earnings before deductions. Net pay is what you take home after taxes, FICA, and any benefit deductions are subtracted.
How much of my paycheck goes to taxes?
It varies, but 15–30% of gross pay commonly goes to federal tax, Social Security, Medicare, and state taxes combined. High earners and high-tax states can see more.
Does the time card calculator show net pay?
No. Our calculators show gross pay before deductions, because withholding depends on your personal tax situation. Use your pay stub for exact net figures.
Related tools & guides
This guide is for general informational purposes only and is not legal, tax, or financial advice. Labor laws vary by state and change over time. Confirm your specific situation with your employer, HR department, or the U.S. Department of Labor.