Net income (take-home pay)

How it works

Net pay equals gross pay once every deduction on the stub has been subtracted. Common deductions include federal income tax withholding, state or local income tax where it applies, and Social Security and Medicare taxes, which for 2026 take 7.65% of most employees’ wages (6.2% plus 1.45%). Health insurance premiums, retirement contributions and other deductions can come out as well.

Take-home pay is the practical starting point for a budget, because it is the money you can actually assign to bills and goals. It can change even when your salary does not: a new benefit election, a different retirement contribution rate or an updated Form W-4, which tells your employer how much income tax to withhold, can each raise or lower it. If your pay is split between accounts, add the deposits together before comparing them with the stub.

A larger paycheck is not automatically a better one. Some deductions, such as traditional 401(k) contributions, come out before income tax is figured, so saving more can lower take-home pay by less than the amount saved. Withholding works the other way: if less tax is withheld during the year, take-home pay rises, but any shortfall can come due when you file your return.

Related terms

Sources and further reading

• CFPB: Understanding your pay stub
• CFPB: What is a debt-to-income ratio?

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.