Understanding Your Paycheck
Ever received your first paycheck at a new job and wondered where all the money went? The difference between your Gross Pay (what you earn) and your Net Pay (what you take home) comes down to taxes and deductions. Our Paycheck Calculator helps you estimate your actual take-home pay so you can budget accurately.
If you are trying to figure out how much you can afford to pay off debt each month with your new take-home pay, check out our Credit Card Payoff Calculator.
Gross Pay vs. Net Pay
- Gross Pay: This is the total amount of money you earn before any taxes or deductions are taken out. If you are salaried at $60,000 a year, your gross pay per month is $5,000.
- Net Pay: This is your "take-home pay." It is the actual amount deposited into your bank account after all taxes, insurance premiums, and retirement contributions have been subtracted.
Net Pay = Gross Pay - Pre-Tax Deductions - Taxes - Post-Tax Deductions
Common Payroll Deductions
Your paycheck will typically have several standard deductions:
- Federal Income Tax: Goes to the US federal government. The amount depends on your tax bracket and what you claimed on your W-4.
- State Income Tax: Varies heavily by state. Some states (like Texas and Florida) have 0% state income tax, while others have relatively high rates.
- FICA (Payroll Tax): A mandatory 7.65% tax that funds Social Security (6.2%) and Medicare (1.45%).
- Pre-Tax Deductions: Things like 401(k) contributions and health insurance premiums. These are taken out before taxes are applied, which actually lowers your taxable income!