How to Find Net Pay — The Formula, Deductions, and a Worked 2026 Example

Net pay is the money that actually lands in your bank account after everything is taken out. The formula is simple:

Net pay = Gross pay − taxes − deductions

To find your net pay, start with your gross pay (your salary or hourly earnings before anything is removed), then subtract three buckets: federal income tax withholding, payroll taxes (Social Security 6.2% and Medicare 1.45%), and any state or local income tax. Then subtract pre-tax deductions like a 401(k) contribution or your share of health insurance, plus any after-tax deductions. What's left is your take-home pay.

The short version:

• Gross pay — total earnings before deductions
• Minus federal income tax — withheld based on your Form W-4 and the IRS 2026 withholding tables
• Minus FICA — 6.2% Social Security + 1.45% Medicare = 7.65% of most paychecks
• Minus state/local tax — varies by state; nine states have no income tax
• Minus pre-tax deductions — 401(k), HSA, health premiums (these also lower your taxable income)
• Equals net pay — the number on your direct deposit

Below is the formula in plain terms, exactly what each deduction is, and a full worked example using real 2026 figures so you can find your own net pay from any offer letter or paycheck.

The net pay formula, explained

Net income — "net pay" on a paycheck — is what remains after mandatory and voluntary withholdings are removed from gross earnings. Two people with the identical gross salary can take home very different amounts, because the deductions depend on where they live, how they filled out their W-4, and what benefits they signed up for.

Here's the order the math actually runs in on a real paycheck:

1. Start with gross pay. For salaried workers, that's your annual salary divided by the number of pay periods. For hourly workers, it's hours worked times your rate, plus overtime.
2. Subtract pre-tax deductions first. A traditional 401(k) contribution and pre-tax health premiums come out *before* income tax is calculated. This is why they lower your tax bill — they shrink the amount that gets taxed.
3. Calculate federal income tax on the reduced amount, using your filing status and W-4 entries.
4. Calculate FICA (Social Security + Medicare). Note: FICA is charged on most pre-tax amounts too — a 401(k) contribution does *not* reduce your Social Security and Medicare tax, even though it reduces income tax.
5. Subtract state and local income tax, if your state has one.
6. Subtract any after-tax deductions, like a Roth 401(k) or garnishments.

Whatever survives that gauntlet is your net pay. The single biggest mistake people make when reading an offer is treating the gross salary as spendable money. On a typical paycheck, roughly 20–35% of gross disappears before you see a dollar of it.

What gets deducted from your paycheck

Four categories come out of nearly every paycheck. Understanding each one tells you exactly why your take-home is lower than your salary.

Federal income tax

This is withheld based on the Form W-4 you gave your employer and the 2026 IRS withholding methods. For 2026, the IRS set the standard deduction at $16,100 for single filers and $32,200 for married filing jointly. The seven tax brackets — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — are unchanged from 2025; only the income thresholds moved up with inflation. Your employer estimates your annual tax and withholds a slice each pay period, which is why withholding is an approximation you reconcile at tax time.

FICA: Social Security and Medicare

Payroll taxes under FICA are flat and predictable. Per IRS Topic 751:

• Social Security: 6.2% of wages, up to the 2026 wage base of $184,500. Earnings above that cap aren't taxed for Social Security.
• Medicare: 1.45% of *all* wages, with no cap.
• Additional Medicare Tax: 0.9% on wages over $200,000 in a calendar year.

Together, the base FICA rate is 7.65% on most paychecks — this comes out no matter which state you live in and regardless of your W-4.

State and local income tax

This varies more than any other line. Nine states — including Texas, Florida, and Washington — levy no state income tax at all, so residents there skip this deduction entirely. Others use flat rates or progressive brackets, and some cities (New York City, for example) add a local income tax on top. If you're comparing two offers in different states, this is often the difference-maker.

Pre-tax deductions (401(k), health insurance, HSA)

These are amounts you elect to withhold. A traditional 401(k) contribution, your health insurance premium share, and HSA/FSA contributions typically come out pre-tax, which lowers your federal (and usually state) income tax. Roth 401(k) contributions, by contrast, come out *after* tax. These deductions are voluntary, but they're the reason two coworkers with the same salary and state can have net pay that differs by hundreds of dollars per check.

Step-by-step worked example (2026 numbers)

Let's find the net pay for Maya, a single filer earning a $78,000 annual salary in a state with a 4% flat income tax. She's paid semi-monthly (24 checks a year) and contributes 5% to a traditional 401(k). Health insurance is $120 per paycheck, pre-tax.

Step 1 — Gross pay per period: $78,000 ÷ 24 = $3,250.00

Step 2 — Pre-tax deductions:

• 401(k) at 5% of $3,250 = $162.50
• Health premium = $120.00
• Total pre-tax = $282.50

Step 3 — Taxable wages for income tax: $3,250 − $282.50 = $2,967.50

Step 4 — Federal income tax: Using 2026 withholding for a single filer with the standard deduction, roughly $300 is withheld this period (your exact figure depends on your W-4).

Step 5 — FICA (charged on gross minus pre-tax *health* premium, but not minus the 401(k)):

• Social Security: 6.2% of ($3,250 − $120) = $3,130 × 6.2% = $194.06
• Medicare: 1.45% of $3,130 = $45.39

Step 6 — State income tax: 4% of $2,967.50 = $118.70

Step 7 — Add it up:

Maya's gross was $3,250, but her take-home is $2,309.35 — about 71% of gross. Her $162.50 going into the 401(k) is still hers; it's saved, not spent. So her true "gone" amount is closer to $778 per check in taxes and premiums.

Salaried vs. hourly: the one difference that matters

The net pay formula is identical for both — the only thing that changes is how you calculate gross pay.

• Salaried: annual salary ÷ number of pay periods. It's the same gross every check (barring bonuses), so your net is stable and easy to budget.
• Hourly: hours worked × hourly rate, plus overtime at 1.5× for hours over 40 in a week under federal Fair Labor Standards Act rules. Your gross — and therefore your net — swings with your schedule.

For hourly work, a lighter week means less gross, which also means less tax withheld, so the percentage you keep can shift slightly week to week. If you're weighing an hourly offer against a salaried one, convert both to the same basis first — annualize the hourly rate (rate × expected hours × 52) before running the net pay math. For salary benchmarks by role, our breakdown of software engineer salary shows how base wage and total comp diverge.

Tools to find your net pay fast

You don't have to do the arithmetic by hand every time. A few reliable options:

• Your pay stub. The fastest source of truth. Every stub itemizes gross, each deduction, and net. If you already have one, you've already found your net pay.
• The IRS Tax Withholding Estimator. The IRS offers a free tool to check whether your federal withholding is on track, which directly affects net pay.
• A paycheck calculator. Many free calculators let you enter gross, state, filing status, and deductions to estimate net pay for any offer — useful before you've received a single stub.
• A spreadsheet. Recreate the seven-step table above once, and you can test any salary, state, or 401(k) rate in seconds.

When you're evaluating a job offer, run the number for *your* state and *your* benefit elections — a $90,000 offer in Texas and a $90,000 offer in California produce meaningfully different take-home pay.

Knowing your real net pay is only half of evaluating an offer — the other half is being able to negotiate it. If you're weighing an offer or want to push on the number, the highest-leverage move is talking to the actual hiring manager, not the portal.

Articuler helps jobseekers find that specific person across 980M+ profiles, then helps you draft a personalized note that gets a reply — so you're negotiating comp with a human, not a form.

For the conversation itself, our guide on answering salary expectations covers how to frame the number once you know your true take-home.

FAQ

How do I find my net pay from my gross salary?

Subtract federal income tax, FICA (6.2% Social Security + 1.45% Medicare), state and local income tax, and any pre-tax deductions like a 401(k) or health premium from your gross pay. What remains is your net pay. On a typical paycheck, net pay is about 65–80% of gross.

What is the difference between gross pay and net pay?

Gross pay is your total earnings before any deductions — the number on your offer letter. Net pay is what's left after taxes and deductions are removed — the amount deposited in your account. Net is always lower than gross.

How much of my paycheck goes to taxes?

FICA alone is 7.65% (6.2% Social Security + 1.45% Medicare) for most workers. Add federal income tax and state tax, and total withholding commonly lands between 20% and 35% of gross, depending on your income, filing status, and state.

Do 401(k) contributions lower my net pay or my taxes?

A traditional 401(k) contribution reduces your net pay (the money is diverted into your retirement account) and lowers your federal income tax, since it comes out pre-tax. It does *not* reduce your Social Security or Medicare tax — FICA still applies to that amount.

Why is my take-home pay lower than I expected?

The most common reasons are FICA (7.65% off the top), state income tax if your state has one, and pre-tax deductions like health insurance and retirement contributions. Reviewing each line on your pay stub shows exactly where every dollar went.