Take-home pay explained: gross, net, and every deduction in between

The bottom line

The number on your offer letter is gross. The number that hits your bank account is net. The gap is roughly 20–35% for typical US filers — split between pre-tax deductions (401(k), health insurance), federal income tax, FICA payroll tax, state and local income tax, and post-tax deductions. Understanding which line affects which tax base is the difference between making smart pay-period decisions and leaving money on the table.

The build-up: gross to net in six layers

Every paycheck walks the same six layers, in this order:

1. Gross pay — the headline number, paid for the period.
2. Pre-tax deductions — 401(k), HSA, FSA, traditional IRA (when applicable), commuter benefits. Subtracted before income tax is computed; some also reduce FICA wages.
3. Federal income tax withholding — your employer applies the IRS withholding tables based on your Form W-4 and pay-period frequency.
4. FICA — Social Security 6.2% (capped at the $176,100 wage base for 2026) + Medicare 1.45% (uncapped) + 0.9% Additional Medicare on wages above $200,000 single / $250,000 MFJ.
5. State and local income tax — varies wildly. 0% in Texas, Florida, Washington. ~13.3% top rate in California. NYC layers on city income tax.
6. Post-tax deductions — Roth 401(k), employee stock purchase plan, parking, garnishments, after-tax health premium.

The order matters because each layer's tax base depends on what was subtracted before it. A 401(k) contribution reduces both your federal income-tax-eligible wages AND your FICA Medicare wages. A Roth 401(k) contribution comes from after-tax money — it does not reduce your tax base today.

Pre-tax vs Roth (post-tax) — the structural fork

For US W-2 employees, the most consequential paycheck choice is the traditional vs Roth split on retirement contributions:

• Traditional 401(k) / IRA: contribution is pre-tax, reduces your taxable income today, grows tax-deferred, and is fully taxed on withdrawal.
• Roth 401(k) / IRA: contribution is post-tax, no deduction today, grows tax-free, no tax on withdrawal.

If your marginal rate is higher today than at retirement, traditional wins. If it's lower today, Roth wins. The math is laid out in detail in 401(k) vs Roth IRA: which to prioritize. For middle-income filers in the 22% bracket today expecting to be in the 12% bracket in retirement, traditional saves roughly 10 percentage points of effective tax over the life of the contribution. For young filers expecting career growth into a higher-than-current bracket, Roth tends to win.

Worked example: $100,000 single, California, 10% pre-tax 401(k)

Sam earns $100,000 gross, single, no dependents, lives in San Francisco. Contributes 10% to traditional 401(k) ($10,000/year) and $2,400/year to a pre-tax health plan.

Federal income tax (2026 single brackets):

• 10% × $12,400 = $1,240
• 12% × $38,000 = $4,560
• 22% × $21,100 = $4,642
• Federal income tax: $10,442

FICA (computed on $97,600 — gross minus 401(k); health insurance reduces FICA wages too in most plans):

• Social Security 6.2% × $97,600 = $6,051
• Medicare 1.45% × $97,600 = $1,415

California state tax on $87,600 (after pre-tax deductions, before federal standard deduction; state-by-state mechanics vary): roughly $5,500 on this income.

San Francisco — no city income tax for residents.

Take-home: $100,000 − $35,808 = $64,192/year ≈ $5,349/month or $2,469 biweekly (26 periods).

That is 35.8% effective deductions, of which 12.4 points are pre-tax / retirement contributions you keep (just deferred), and the rest (23.4 points) is genuine tax expense.

Pay-period mechanics

Different employers use different pay frequencies; the math is the same, just sliced differently:

• Weekly: 52 periods/year. Common for hourly workers.
• Biweekly: 26 periods/year. Most common for salaried US workers.
• Semimonthly: 24 periods/year (1st and 15th, or 15th and last day). Common in finance / professional services.
• Monthly: 12 periods/year. Common for executives and overseas employees.

Watch out for the “extra paycheck” phenomenon: in any given calendar year, a biweekly schedule produces 26 paychecks, but two of those years out of every seven will see 27 paychecks. If you budget on monthly take-home, this looks like found money; if you budget per-paycheck, your annual income jumps unexpectedly.

Common mistakes

1. Treating the offer letter as the take-home. A $100,000 offer in San Francisco, accepting the default 401(k) and health plan, is around $64–67k take-home depending on choices. Plan accordingly.

2. Ignoring pre-tax FICA reduction. A $10,000 traditional 401(k) contribution saves you 22% × $10,000 = $2,200 in federal income tax PLUS roughly 7.65% × $10,000 = $765 in FICA — but only on the FICA portion if your plan reduces FICA wages (most do). Total tax savings: ~$2,965 on a $10,000 contribution.

3. Confusing withholding with tax owed. Withholding is an estimate — the IRS reconciles at year-end. If you over-withhold, you get a refund; if you under-withhold, you owe with potential underpayment penalty. Review your Form W-4 whenever life changes (marriage, child, second job).

4. Comparing offers across states without adjusting for tax. A $120k offer in Texas is roughly equivalent to a $135–140k offer in California in take-home terms. Use the 4-country compare tool or build the math by hand.

5. Forgetting Additional Medicare 0.9%. Hits at $200,000 single / $250,000 MFJ. Easy to overlook in budgeting at the bracket boundary.

Use the calculators

• US Gross-to-Net Paycheck Calculator — choose your pay frequency, get the per-period number.
• US Federal Income Tax Calculator — full federal + FICA breakdown with all toggles.
• 4-country take-home compare — same gross, four jurisdictions side by side.

What this guide does NOT cover

• State income tax mechanics (every state is its own beast)
• HSA + FSA contribution limits and rules
• Bonus and supplemental wage withholding (different table)
• Stock-based compensation (RSU / ISO / NSO) at vest
• Tax-equalization for expatriate assignments
• Multi-state withholding for remote workers
• Form W-4 worksheet for two-earner households

For decisions involving real money — equity compensation, multi-state withholding, year-end planning — consult a CPA. The cost of one consultation is small relative to the cost of getting it wrong.