Gross vs Net Income: A Complete Paycheck Walkthrough
Your gross salary is what your employer pays you. Your net pay is what arrives in your bank account. For most US workers, that gap is 20 to 35%. This guide walks every deduction in the exact order it is applied, with real examples at $60k, $90k, and $150k for 2026.
Step 1 - The Paycheck Sequence
Deductions come off your gross pay in this order:
Gross Pay
Your full salary or hourly wages for the period
Pre-Tax Deductions
401(k) traditional, HSA, health premium, FSA - subtracted before tax is calculated
Federal Income Tax
Bracket-based on taxable wages (gross minus pre-tax deductions), estimated via W-4
State Income Tax
Varies by state - zero in TX, FL, NV; up to 13.3% top rate in CA
Social Security Tax
6.2% on wages up to $184,500 (2026 wage base)
Medicare Tax
1.45% on all wages (no cap); plus 0.9% above $200k single
Post-Tax Deductions
Roth 401(k), union dues, garnishments - applied after all taxes
Net Pay
What lands in your bank account
Step 2 - Pre-Tax Deductions: Which Taxes Do They Reduce?
Not all pre-tax deductions reduce the same taxes. This table shows exactly which boxes each deduction reduces on your W-2 and paycheck.
| Deduction Type | Federal Tax | State Tax | SS / Medicare | W-2 Box 1 |
|---|---|---|---|---|
| Traditional 401(k) | Yes | Usually | No | Reduced |
| Roth 401(k) | No | No | No | Not reduced |
| HSA (via Sec 125 plan) | Yes | Usually | Yes | Reduced |
| Health Ins. Premium (Sec 125) | Yes | Usually | Yes | Reduced |
| FSA (Dependent Care / Medical) | Yes | Usually | Yes | Reduced |
| Commuter Benefits (Sec 132) | Yes | Usually | Yes | Reduced |
| Traditional IRA (payroll) | No* | No* | No | Not reduced |
*Traditional IRA contributions reduce taxable income on your Form 1040 (above-the-line deduction) but are typically not reflected in payroll. State treatment varies by state.
Step 3 - Federal Income Tax: 2026 Brackets
Federal income tax is calculated on your taxable wages (gross minus pre-tax deductions), using marginal brackets. The 2026 standard deduction is approximately $15,000 for single filers and $30,000 for married filing jointly (verify via IRS Rev Proc).
| Rate | Single Filer Taxable Income | Married Filing Jointly |
|---|---|---|
| 10% | Up to $11,925 | Up to $23,850 |
| 12% | $11,926 - $48,475 | $23,851 - $96,950 |
| 22% | $48,476 - $103,350 | $96,951 - $206,700 |
| 24% | $103,351 - $197,300 | $206,701 - $394,600 |
| 32% | $197,301 - $250,525 | $394,601 - $501,050 |
| 35% | $250,526 - $626,350 | $501,051 - $751,600 |
| 37% | Above $626,350 | Above $751,600 |
Source: IRS Rev Proc 2025-32 / 2026 inflation adjustments. Brackets apply to taxable income (AGI minus standard or itemised deduction). For understanding the difference between AGI and taxable income, see Gross vs AGI and Gross vs Taxable Income. To calculate your effective rate, see effectivetaxratecalculator.com.
Step 4 - State Income Tax: Zero to 13.3%
Nine states impose no income tax on wages (as of 2026). Flat-tax states charge one rate regardless of income. High-tax states use graduated brackets similar to federal.
Zero Income Tax States (2026)
AK, FL, NV, NH, SD, TN, TX, WA, WY
Note: WA has a capital gains tax. NH historically taxed interest/dividends but that is phasing out.
Flat-Rate States
CO 4.4% | IL 4.95% | IN 3.15% | KY 4.5% | MA 5% | MI 4.25% | NC 4.5% | PA 3.07% | UT 4.55%
High-Tax States (Top Rate)
CA: 13.3% | NY: 10.9% + NYC up to 3.876% | NJ: 10.75% | HI: 11% | OR: 9.9%
For full bracket tables in each state, see incometaxbystate.com for paycheck-by-paycheck California breakdowns, see paycheckcalculatorforcalifornia.com.
Step 5 - FICA: Social Security and Medicare
Social Security Rate
6.2%
On first $184,500 only (2026)
Max SS tax: $11,439/year
Medicare Rate
1.45%
No cap - applies to every dollar
Additional Medicare
0.9%
Above $200k (single)
Above $250k (MFJ)
Above $125k (MFS)
Important: FICA applies to gross wages, not to the reduced Box 1 figure. Your employer also pays 6.2% SS and 1.45% Medicare on your behalf - you do not see this on your paystub, but it is part of your total compensation cost. Self-employed workers pay both halves (15.3% total) but deduct half above the line. See the W-2 Box walkthrough for exactly how FICA appears on your W-2.
Three Real Take-Home Examples (2026)
Single filer, no pre-tax deductions, standard deduction, W-4 assuming no adjustments. Figures are illustrative; use the calculator for your exact situation.
| Item | $60k - Texas | $90k - California | $150k - New York |
|---|---|---|---|
| Gross Income | $60,000 | $90,000 | $150,000 |
| Standard Deduction | -$15,000 | -$15,000 | -$15,000 |
| Taxable Income (Fed) | $45,000 | $75,000 | $135,000 |
| Federal Tax | -$4,868 | -$11,273 | -$26,600 |
| SS Tax (6.2%) | -$3,720 | -$5,580 | -$9,269 |
| Medicare Tax (1.45%) | -$870 | -$1,305 | -$2,175 |
| State Tax | $0 | -$4,234 | -$8,460 |
| NYC Local Tax | $0 | $0 | -$4,860 |
| Net Take-Home | $50,542 | $67,608 | $98,636 |
| Take-Home % | 84.2% | 75.1% | 65.8% |
CA state tax estimated using 2026 CA brackets. NY state + NYC local estimated. All figures use 2026 federal brackets and $184,500 SS wage base. Verify exact figures at the calculator.
State-by-State Take-Home Variance at $90k
A $90k salary produces dramatically different take-home pay depending on state. This table shows estimated annual net for a single filer, no pre-tax deductions (2026).
| State | State Tax Rate | Est. Annual Net | Take-Home % |
|---|---|---|---|
| Texas | 0% | $67,608 | 75.1% |
| Florida | 0% | $67,608 | 75.1% |
| Colorado | 4.4% flat | $65,290 | 72.5% |
| North Carolina | 4.5% flat | $65,145 | 72.4% |
| Pennsylvania | 3.07% flat | $66,339 | 73.7% |
| Georgia | 5.49% grad | $63,925 | 71.0% |
| New Jersey | ~5.3% at $90k | $63,800 | 70.9% |
| New York | 6.25% at $90k | $63,012 | 70.0% |
| New York + NYC | 6.25% + 3.1% | $60,187 | 66.9% |
| California | ~6.0% at $90k | $67,608 | 75.1% |
State tax figures are estimates. For exact brackets and paycheck calculations by state, see incometaxbystate.com.
Why Your First Paycheck Is Smaller Than You Expected
A $60,000 salary divided by 26 bi-weekly pay periods is $2,307.69 gross per paycheck. But your net bi-weekly paycheck is roughly $1,750 to $1,950 depending on state, withholding elections, and pre-tax deductions. The gap feels startling. Here is why:
$60,000 annual / 26 pay periods = $2,307.69 gross
Add a 5% 401(k) contribution ($115.38) and a health premium ($90) and your net drops to roughly $1,738. That is 75% of gross before any voluntary deductions. In a state with income tax, the gap widens further.
Calculate Your Exact Take-Home Pay
Enter your salary, state, and deductions. We apply 2026 federal brackets, the $184,500 SS wage base, and your state's tax structure.
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