Gross vs. net pay.

In plain English

Gross pay is your total earnings for a pay period before anything is withheld. Net pay (also called take-home pay) is what remains after federal income tax, FICA (Social Security 6.2% + Medicare 1.45%), state income tax, pre-tax retirement contributions, health insurance premiums, HSA or FSA contributions, and any other deductions. On most paychecks the gap is meaningful: net pay typically lands at 65% to 80% of gross, depending on filing status, state, and benefit elections.

01Why it matters

Mortgage lenders qualify borrowers on gross income; landlords usually use gross too. But what you actually have to live on is net. Job offers and salary negotiations talk in gross dollars; budgets need to be built on net. A $90,000 gross salary in a high-tax state can produce a take-home of around $5,200 a month, which is what bills are actually paid with.

02The math, step by step

A single filer earning $80,000 gross in a state with a 5% income tax, contributing 6% to a pre-tax 401(k) and paying $200 per month in health premiums, would see roughly: $80,000 gross minus $4,800 (401(k)) minus $6,120 (FICA) minus about $7,500 (federal income tax) minus about $3,500 (state tax) minus $2,400 (premiums) = approximately $55,680 net, or about $4,640 per month take-home.

03What this is NOT