Gross Pay vs Net Pay: What's the Difference (With a Worked Example)
Gross pay is what you earn before anything comes out; net pay is what reaches your bank. See every step between them, with real 2026 math from a sample pay stub.
Gross pay is what you earned before anything was taken out. Net pay is what actually lands in your bank account after taxes and deductions. On a typical US paycheck, net pay comes to somewhere around 65% to 80% of gross, and the exact gap depends on your W-4, your state, and the benefits you've signed up for.
That's the textbook answer, and every guide stops there. The part most of them skip is that there isn't one number in between. Your pay stub quietly calculates three different "taxable wage" figures from the same gross pay, one for federal income tax, one for Social Security and Medicare, and one for your state. Once you see that, your pay stub stops looking like a pile of unrelated deductions and starts reading like a single calculation you can check line by line.
We build pay stubs every day at MakeMyPaystub, and our paycheck calculator runs this exact withholding math, so the walk-through below uses a real worked example rather than round numbers.
Gross Pay vs Net Pay at a Glance
| Gross pay | Net pay | |
|---|---|---|
| What it is | Total earnings for the period | What's left after all deductions |
| Includes | Regular pay, overtime, bonuses, commissions, payroll tips | Only the money you take home |
| Where on the stub | Bottom of the earnings section | The net pay box, usually bottom right |
| Who uses it | Lenders, landlords, salary negotiations | Your monthly budget |
| Also called | Total earnings, total gross | Take-home pay, net check |
If you're new to reading the rest of the document, our guide to reading a pay stub walks through every section top to bottom.
How Gross Pay Is Calculated
Hourly employees
Gross pay is hours worked times your hourly rate, plus overtime at 1.5 times your regular rate for hours over 40 in a workweek. That overtime rule comes from the federal Fair Labor Standards Act, and a few states (California is the best known) add daily overtime on top.
Example: 80 regular hours at $28.50 plus 4 overtime hours at $42.75 is $2,280.00 + $171.00 = $2,451.00 gross for a two-week period.
Salaried employees
Gross pay is your annual salary divided by the number of pay periods in the year:
| Pay frequency | Pay periods per year | Gross per check on a $60,000 salary |
|---|---|---|
| Weekly | 52 | $1,153.85 |
| Biweekly | 26 | $2,307.69 |
| Semimonthly | 24 | $2,500.00 |
| Monthly | 12 | $5,000.00 |
Biweekly and semimonthly get confused constantly. Biweekly means every other week, 26 checks a year (occasionally 27 when the calendar lines up). Semimonthly means twice a month, always 24. Same salary, different check size.
Converting between the two? Our salary to hourly calculator does it both directions, using the standard 2,080 working hours in a year.
Everything else that counts as gross
Bonuses, commissions, shift differentials, holiday pay, paid time off, and tips reported through payroll all count toward gross pay. Expense reimbursements under an accountable plan generally don't, because they're repaying you rather than paying you.
The Waterfall: From Gross to Net, Step by Step
Here is the full path from gross to net on a real pay stub. These are the exact figures from the sample stub in our pay stub reading guide: a single filer in California, paid biweekly, contributing 5% to a traditional 401(k) and paying $85 per check for health insurance through a Section 125 plan.
| 4Earnings | Hrs | Rate | Current | 9YTD |
|---|---|---|---|---|
| Regular | 80.00 | 28.50 | 2,280.00 | 43,320.00 |
| Overtime | 4.00 | 42.75 | 171.00 | 3,249.00 |
| Gross pay | 2,451.00 | 46,569.00 |
| 5Pre-tax deductions | Current | YTD |
|---|---|---|
| 401(k) 5% | 122.55 | 2,328.45 |
| Medical (Sec. 125) | 85.00 | 1,615.00 |
| 10Leave | Accrued | Used | Balance |
|---|---|---|---|
| PTO (hrs) | 87.40 | 40.00 | 47.40 |
| Sick (hrs) | 29.30 | 8.00 | 21.30 |
| 6Taxes | Current | YTD |
|---|---|---|
| Federal income tax | 185.37 | 3,522.03 |
| Social Security (OASDI) | 146.69 | 2,787.11 |
| Medicare | 34.31 | 651.89 |
| CA state income tax | 60.85 | 1,156.15 |
| CA SDI | 30.76 | 584.44 |
| 7Post-tax deductions | Current | YTD |
|---|---|---|
| Union dues | 25.00 | 475.00 |
- 1Employer information. Company name and address. Some states also require the employer FEIN or legal entity name.
- 2Employee information. Your name, employee ID, and usually only the last four digits of your SSN.
- 3Pay period and pay date. The dates you worked versus the date you were paid. They are rarely the same.
- 4Earnings. Each pay type on its own line: hours, rate, this period, and year to date.
- 5Pre-tax deductions. Taken out before income tax is figured, which lowers your taxable wages.
- 6Taxes. Federal income tax, Social Security (OASDI), Medicare, and any state or local taxes.
- 7Post-tax deductions. Taken out after taxes: Roth 401(k), union dues, garnishments.
- 8Net pay. What actually lands in your bank account.
- 9Year-to-date (YTD) column. Running totals since January 1. Lenders and landlords read this column first.
- 10Leave balances. PTO and sick hours accrued, used, and remaining.
Sample pay stub with illustrative figures: biweekly pay period 19 of 26 in 2026, single filer, California employee. Built with the MakeMyPaystub builder.
| Step | Line | Amount | Running total |
|---|---|---|---|
| 1 | Gross pay (regular + overtime) | $2,451.00 | |
| 2 | Pre-tax: 401(k) 5% | −$122.55 | |
| 3 | Pre-tax: medical (Sec. 125) | −$85.00 | |
| 4 | Federal income tax | −$185.37 | |
| 5 | Social Security (OASDI) | −$146.69 | |
| 6 | Medicare | −$34.31 | |
| 7 | California income tax | −$60.85 | |
| 8 | California SDI | −$30.76 | |
| 9 | Post-tax: union dues | −$25.00 | |
| Net pay | $1,760.47 |
All told, $690.53 came out of a $2,451.00 check. Taxes were $457.98 (18.7% of gross), pre-tax benefits $207.55, and post-tax deductions $25.00. Net pay is 71.8% of gross, squarely in the typical range.
The Part Most Guides Skip: Three Different Taxable Wages
Look at steps 2 and 3 again. Both are "pre-tax," but they are not pre-tax for the same taxes. That's the source of most confusion about pay stubs, and the reason your W-2 numbers never match your gross pay.
| Wage base | How it's calculated here | Amount | Taxes figured on it |
|---|---|---|---|
| Federal income tax wages | Gross − 401(k) − Sec. 125 medical | $2,243.45 | Federal income tax, and in this case California income tax |
| Social Security and Medicare wages | Gross − Sec. 125 medical (401(k) is not excluded) | $2,366.00 | OASDI 6.2%, Medicare 1.45% |
| California SDI wages | Same as FICA wages here | $2,366.00 | SDI 1.3% |
The rules come from the IRS: traditional 401(k) deferrals are excluded from income tax wages but remain subject to Social Security and Medicare, while Section 125 cafeteria plan premiums are excluded from both, as laid out in IRS Publication 15 and Publication 15-B. Your state decides its own definition, and most follow the federal treatment.
That's also why, at year end, Box 1 of your W-2 (income tax wages) is usually lower than Boxes 3 and 5 (Social Security and Medicare wages), and all three are lower than the gross pay on your final stub. Our post on pre-tax vs post-tax deductions goes deeper on which benefits land where.
Check the Math on Your Own Pay Stub
You can verify the federal payroll taxes on any stub in about two minutes. The income tax line is harder (it depends on your W-4), but FICA is pure arithmetic:
- Find your FICA wages. Gross pay minus any Section 125 deductions (health, dental, vision premiums, health FSA, HSA through payroll). Do not subtract the 401(k).
- Multiply by 6.2% for Social Security. Here: $2,366.00 × 0.062 = $146.69. Matches.
- Multiply by 1.45% for Medicare. Here: $2,366.00 × 0.0145 = $34.31. Matches.
- Add every deduction and subtract from gross. If you don't land exactly on net pay, there's a deduction you haven't identified yet, often one hiding under an abbreviation. Our pay stub abbreviations glossary decodes them.
Two exceptions to know. Social Security stops for the year once your wages pass the 2026 wage base of $184,500 (the maximum employee tax is $11,439, per the SSA), so high earners see that line drop to zero late in the year. And Medicare picks up an extra 0.9% on wages above $200,000. Our explainer on OASDI covers both.
Why Two People With the Same Gross Pay Take Home Different Amounts
Gross pay is set by your job. Net pay is shaped by choices and circumstances that differ for every person:
- Your W-4. Filing status, dependents claimed in Step 3, other income or deductions in Step 4, and any extra withholding all change the federal income tax line. The IRS Tax Withholding Estimator is the official way to check yours.
- Where you live and work. Nine states don't tax wages at all; others take several percent, and some cities add their own income tax. Disability and paid leave programs (California's SDI, New Jersey's TDI and FLI, New York's PFL) add small deductions. See what SDI is.
- Benefit elections. Family health coverage costs far more per check than single coverage, and it's usually pre-tax, which slightly reduces your taxes in exchange.
- Retirement contributions. Moving from 5% to 10% in a traditional 401(k) cuts net pay by less than the extra 5%, because part of it would have gone to income tax anyway.
- Garnishments and other post-tax deductions. Child support orders, wage levies, union dues, and Roth contributions come out after taxes.
Our paycheck calculator lets you change each of these and watch net pay move, with state rules for all 50 states and DC. If you're paid by the hour, the hourly paycheck calculator starts from hours and rate instead of salary.
Gross or Net: Which Number Do Lenders and Landlords Want?
In almost every case, gross.
- Mortgage lenders compute your debt-to-income ratio from gross monthly income, and Fannie Mae's Selling Guide requires a recent pay stub that shows year-to-date earnings so the lender can verify it.
- Landlords commonly use a rule of thumb that gross monthly income should be around 2.5 to 3 times the rent. It's a screening convention, not a law, and individual landlords set their own bar.
- Auto lenders and credit card issuers ask for gross annual income on applications.
That's why the year-to-date column matters so much; see what YTD means on a pay stub and our guide to proof of income. For your own budget, though, net pay is the only number that matters, since it's the money you can actually spend.
Working Backward: How to Gross Up a Payment
Sometimes you know the net amount and need the gross. Employers do this when they want an employee to receive a round bonus after taxes, a practice called grossing up.
The formula is: gross = desired net ÷ (1 − total withholding rate).
Example: to hand someone a $1,000 net bonus, an employer using the IRS's optional 22% flat rate for supplemental wages (Publication 15) plus 7.65% for Social Security and Medicare, and ignoring state tax, would pay:
$1,000 ÷ (1 − 0.22 − 0.0765) = $1,000 ÷ 0.7035 = $1,421.46 gross
Check: $1,421.46 × 29.65% = $421.46 withheld, leaving exactly $1,000.00. Add a state rate to the withholding total if the employee lives somewhere with income tax.
Frequently Asked Questions
What is the difference between gross pay and net pay?
Gross pay is everything you earned in the pay period before any deductions: regular wages, overtime, bonuses, commissions, and tips run through payroll. Net pay is what's left after taxes and deductions come out, which is the amount deposited in your bank account. On a typical pay stub, net pay is roughly 65% to 80% of gross.
How do I calculate net pay?
Start with gross pay, subtract pre-tax deductions (like a traditional 401(k) or Section 125 health premiums) to get taxable wages, subtract federal income tax, Social Security (6.2%), Medicare (1.45%), and any state or local taxes, then subtract post-tax deductions such as Roth 401(k) contributions, union dues, or garnishments. What remains is net pay.
Is gross pay the same as salary?
Not quite. Salary is an annual figure. Gross pay is the slice of it paid in one pay period: a $60,000 salary is $2,307.69 gross per biweekly paycheck (26 pay periods), $2,500 semimonthly (24), or $5,000 monthly (12). Gross pay for a period can also include overtime, bonuses, or commissions on top of the salary slice.
Do landlords and lenders look at gross or net pay?
Usually gross. Mortgage lenders calculate debt-to-income ratios on gross monthly income, and the common landlord rule of thumb (income of about 2.5 to 3 times the monthly rent) is normally applied to gross income. Always confirm with the specific landlord or lender, because a few screen on net.
What percentage of gross pay is taken out for taxes?
It depends on income, filing status, state, and benefits. Federal payroll taxes alone (Social Security and Medicare) take 7.65% of FICA wages. In our sample pay stub for a single California employee earning $2,451 biweekly, taxes totaled $457.98, about 18.7% of gross, and all deductions together took 28.2%.
Why is my net pay different from a coworker's with the same gross pay?
Because almost every step between gross and net is personal: your W-4 elections, benefit choices, 401(k) percentage, state and city of residence, and any garnishments. Two people at the same gross can easily be $200 or more apart in net pay per check.
What does grossing up a payment mean?
Grossing up means working backward from the net amount you want someone to receive to the gross amount needed to cover the withholding. To hand someone a $1,000 net bonus using the 22% federal supplemental rate plus 7.65% FICA (ignoring state tax), you divide 1,000 by 0.7035, which gives a gross of $1,421.46.
Is gross pay the same as taxable income?
No. Pre-tax deductions reduce your taxable wages, and each tax uses its own definition. A traditional 401(k) lowers federal income tax wages but not Social Security and Medicare wages, while Section 125 health premiums lower both. That's why the wages in Box 1 of your W-2 are usually lower than your total gross pay.
Where do I find gross and net pay on my pay stub?
Gross pay is the total line at the bottom of the earnings section, often labeled Gross Pay, Total Earnings, or Total Gross. Net pay is usually in a box near the bottom right, labeled Net Pay, Net Check, or Take Home. Both are shown for the current period and year to date.
Can net pay ever be higher than gross pay?
Not under normal payroll. The rare exceptions involve non-wage reimbursements added after taxes, such as a mileage or expense reimbursement paid through payroll. Those amounts can push the deposit above taxable gross, but they are reimbursements rather than wages.
The Takeaway
Gross pay is what you earned; net pay is what you keep. Between them sit pre-tax deductions, three separate taxable wage figures, federal and state taxes, and post-tax deductions, and every one of them can be checked against your own stub with a calculator and the rates above. When a lender or landlord asks about income, give them gross. When you plan your month, use net.
If you want to see how a raise, a new state, or a bigger 401(k) contribution would change your take-home pay, run the numbers in our free paycheck calculator.
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