Paycheck Calculator

Gross Pay vs. Net Pay: Where the Money Goes

Your gross pay is the salary you negotiated. Your net pay (take-home pay) is what actually lands in your bank account. The gap between the two is filled by mandatory taxes and voluntary deductions. Understanding this gap is the first step to controlling your finances.

Mandatory deductions include federal income tax, FICA (Social Security and Medicare), and state income tax (if you live in a state with one). Voluntary deductions include health insurance premiums, dental, vision, life insurance, and retirement contributions like a 401(k). While mandatory taxes are non-negotiable, voluntary deductions are the levers you can pull to lower your taxable income today.

The Hidden Benefit of 401(k) Contributions

When you contribute to a Traditional 401(k), the money is taken out of your paycheck before taxes are calculated. If you earn $75,000 and contribute $5,000 to your 401(k), your taxable income drops to $70,000. This means you save money on federal and state income taxes today, while simultaneously building your retirement fund.

Furthermore, if your employer offers a match (e.g., 50% of your contributions up to 6% of your salary), that is an immediate, guaranteed return on investment. Not contributing enough to get the full match is the equivalent of leaving free money on the table. The calculator above shows exactly how your 401(k) percentage impacts your take-home pay.

Understanding FICA Taxes

FICA stands for the Federal Insurance Contributions Act. It is composed of two parts: Social Security and Medicare. For 2026, you pay 6.2% toward Social Security on the first $168,600 of your salary. You pay 1.45% toward Medicare on all of your salary, with an additional 0.9% surtax if you earn above $200,000 (single) or $250,000 (married).

Unlike federal income tax, FICA taxes are flat. You cannot deduct them, and you cannot lower them by contributing to a 401(k) or HSA. However, you stop paying the Social Security portion once your year-to-date income hits the wage base limit. If you are a high earner, you may notice your paychecks getting slightly larger in the final months of the year.

The "Two Extra Paychecks" Rule

If you are paid bi-weekly (every two weeks), you receive 26 paychecks per year, not 24. This means that twice a year (usually in spring and fall), you will receive three paychecks in a single month. This happens because 26 paychecks divided by 12 months leaves a remainder of two.

Financial planners often recommend using these two "extra" paychecks to fund your emergency savings, pay down debt, or make an extra mortgage payment. Budgeting based on two paychecks per month makes it easier to absorb irregular expenses without going into debt.

Why State Taxes Matter

Your state of residence significantly impacts your take-home pay. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no state income tax. Other states have flat taxes (like Illinois at 4.95% or Colorado at 4.4%), while states like California, New York, and New Jersey have progressive brackets that can exceed 10% for high earners.

For remote workers, this is a crucial factor. You typically pay state income tax based on your physical residence, not the location of your employer. Moving from a high-tax state to a no-tax state can effectively give you a 5% to 10% raise, even if your gross salary remains the same. The state tax input above allows you to run scenarios for different locations.