Gross Pay vs Net Pay: What's the Difference?

Gross pay is what you earn before any deductions. For an hourly worker, gross pay is hourly rate × hours worked, plus overtime, tips, and any bonuses. Salaried workers get the same gross pay each period regardless of hours.

Examples:

• $20/hour × 40 hours = $800 gross pay for one week
• $25/hour × 32 hours + $50 in tips = $850 gross pay for one week
• $52,000/year salary = $1,000 gross pay per week (52 weeks)

Gross pay is the number you negotiate when you take a job and the number that appears at the top of every pay stub. It's also the figure used for FICA calculations (7.65% comes off gross, not net).

Net pay is what's left after every deduction comes out — also called 'take-home pay.' It's the dollar amount that actually shows up in your bank account on payday.

For most W-2 workers, the deductions on a paycheck fall into three buckets:

1. Mandatory tax withholding — federal income tax, state income tax (if your state has one), FICA (7.65% for Social Security + Medicare)
2. Voluntary pre-tax deductions — health insurance premiums, 401(k) or other retirement, HSA / FSA contributions, transit benefits
3. Voluntary post-tax deductions — Roth 401(k), some insurance products, garnishments

Your pay stub itemizes each line. The bottom-line number after all of these come out is your net pay.

Here is a typical breakdown for a W-2 worker earning $20/hour, 40 hours/week, single filer, no extra deductions, in a state with no state income tax (e.g. Texas):

Take-home rate: ~86%. In a state with income tax (e.g. California), the same gross pay would yield about $645–$665 net (around 81-83%).

For your exact state, use our Paycheck Calculator.

The size of the gross-to-net gap depends on:

• Filing status — single vs married filing jointly changes the federal tax brackets
• W-4 elections — see our What Is a W-4 guide; more allowances or extra withholding both move the dial
• State income tax — nine states have no income tax; others range from ~3% to over 10%
• Pre-tax benefits — health insurance, 401(k), HSA all lower taxable income (and therefore tax) but also lower net cash
• Tip income — for tipped workers, both gross and net include reported tips; FICA still applies (see Tips and Taxes)
• Overtime — hours over 40 in a workweek are paid at 1.5× under federal FLSA (see What Is Overtime Pay)

1099 workers don't have any of these withheld at the time of payment — they receive 100% of gross and owe estimated quarterly taxes themselves.

Net pay can vary even when gross pay is similar. Common reasons:

• Overtime hours — bumps gross higher, which can push some of your wages into a higher tax-withholding bracket
• Bonuses — typically taxed at a flat supplemental rate (federal default 22%) which can feel like a higher percentage
• Hitting the Social Security wage base — high earners stop paying the 6.2% SS portion mid-year (SSA wage base)
• Benefit elections changing — open enrollment, life events, mid-year deductible resets can change deductions
• Tip income variation — for tipped workers, FICA on reported tips changes with the tip total

If the change is unexplained, check your pay stub line by line and ask your employer's payroll team to walk through it.

Use these primary sources to verify any number on this page:

• IRS Publication 15 (Circular E) — Employer's Tax Guide; the official source for federal withholding tables
• IRS Tax Withholding Estimator — official calculator for fine-tuning your W-4
• SSA — Contribution and Benefit Base — current Social Security wage base
• IRS Topic No. 751 — Social Security and Medicare withholding rates

For your state's income tax rate, check your state's Department of Revenue or use the Tax Foundation state income tax rates.