What Is Take-Home Pay?

Take-home pay (also called "net pay") is the actual money that hits your bank account after all deductions. It's not your salary or "gross pay."

The formula:

Take-Home Pay = Gross Pay - (Taxes + Pre-Tax Deductions + Post-Tax Deductions)

Most people are surprised when they realize their advertised salary isn't what they'll actually receive.

Why Your Salary ≠ Your Take-Home Pay

Let's start with a reality check. If you're offered $100,000/year, here's what you might actually take home:

Example: $100K salary in California (Single filer)

• Gross annual salary: $100,000
• Federal income tax: ~$14,260
• California state tax: ~$4,600
• Social Security (FICA): $6,200
• Medicare: $1,450
• Take-home pay: ~$73,490/year or $6,124/month

You're losing 26.5% of your gross salary to taxes alone. And we haven't even included 401(k) contributions, health insurance, or other deductions.

Calculate your exact take-home pay now →

Step-by-Step: Calculate Your Take-Home Pay

Step 1: Start with Gross Annual Salary

This is the number in your offer letter or employment contract.

Example: $100,000/year

Step 2: Subtract Pre-Tax Deductions

These reduce your taxable income before taxes are calculated:

Common pre-tax deductions:

• 401(k) contributions: Up to $23,000 in 2025
• Traditional IRA: Up to $7,000 in 2025
• HSA (Health Savings Account): $4,150 (individual) or $8,300 (family)
• FSA (Flexible Spending Account): Up to $3,200
• Health insurance premiums: Varies by plan
• Commuter benefits: Up to $315/month for transit

Example calculation:

• Gross salary: $100,000
• 401(k) contribution (10%): -$10,000
• HSA contribution: -$4,150
• Health insurance: -$1,200/year
• Taxable income: $84,650

Why this matters: Every dollar you contribute pre-tax saves you money on taxes. That $10,000 in 401(k) saves you ~$2,200-2,800 in taxes (22-28% bracket).

Step 3: Calculate Federal Income Tax

Federal income tax uses a progressive bracket system. You don't pay one flat rate - different portions of your income are taxed at different rates.

2025 Federal Tax Brackets (Single Filer):

• 10% on income up to $11,600
• 12% on income $11,601 to $47,150
• 22% on income $47,151 to $100,525
• 24% on income $100,526 to $191,950
• 32% on income $191,951 to $243,725
• 35% on income $243,726 to $609,350
• 37% on income over $609,350

How to calculate:

For our $84,650 taxable income example:

1. First $11,600 at 10% = $1,160
2. Next $35,550 ($47,150 - $11,600) at 12% = $4,266
3. Remaining $37,500 ($84,650 - $47,150) at 22% = $8,250
4. Total federal tax: $13,676

Pro tip: Your "marginal rate" (22%) is different from your "effective rate" (16.2%). The marginal rate is what you pay on your last dollar earned.

Step 4: Calculate State Income Tax

This varies dramatically by state.

9 states with NO income tax:

• Alaska, Florida, Nevada, New Hampshire*, South Dakota, Tennessee, Texas, Washington*, Wyoming
• (*NH taxes interest/dividends; WA has capital gains tax)

States with FLAT tax rates:

• Colorado: 4.40%
• Illinois: 4.95%
• Indiana: 3.05%
• Michigan: 4.25%
• And others...

States with PROGRESSIVE rates (like California):

• California: 1% to 13.3%
• New York: 4% to 10.9%
• Hawaii: 1.4% to 11%

Example for California (progressive): On $84,650 taxable income:

• State tax: ~$4,200

Example for Texas (no income tax):

• State tax: $0

The difference: Texas saves you $4,200/year in this example! See your state →

Step 5: Calculate FICA Taxes

FICA = Social Security + Medicare. Everyone pays these, regardless of state.

2025 FICA Rates:

• Social Security: 6.2% on first $168,600 of income
• Medicare: 1.45% on all income
• Additional Medicare Tax: 0.9% on income over $200,000 (single) or $250,000 (married)

Example on $100K gross:

• Social Security: $100,000 × 6.2% = $6,200
• Medicare: $100,000 × 1.45% = $1,450
• Total FICA: $7,650

Note: If you're self-employed, you pay DOUBLE (employer + employee portion) = 15.3% total.

Step 6: Calculate Local/City Taxes (If Applicable)

Some cities and counties charge income tax:

Cities with local income tax:

• New York City: 3.078% to 3.876%
• Philadelphia, PA: 3.75%
• Detroit, MI: 2.4%
• Cleveland, OH: 2.5%
• Baltimore, MD: 3.2%
• And 14+ other cities

Example: NYC resident On $100K salary, add ~$3,800 in city tax.

Step 7: Subtract Post-Tax Deductions

These come out after taxes are calculated:

Common post-tax deductions:

• Roth 401(k) contributions
• Roth IRA contributions (done outside payroll usually)
• Disability insurance premiums
• Life insurance
• Union dues
• Parking fees (if not pre-tax)
• Wage garnishments

Example:

• Additional life insurance: $50/month = $600/year
• Parking: $100/month = $1,200/year
• Total post-tax deductions: $1,800/year

Step 8: Calculate Final Take-Home Pay

Putting it all together:

Starting point: $100,000 gross salary (California, single filer)

Pre-tax deductions:

• 401(k): -$10,000
• HSA: -$4,150
• Health insurance: -$1,200
• Taxable income: $84,650

Taxes:

• Federal income tax: -$13,676
• California state tax: -$4,200
• Social Security: -$6,200
• Medicare: -$1,450
• Total taxes: -$25,526

Post-tax deductions:

• Life insurance: -$600
• Parking: -$1,200
• Total post-tax: -$1,800

Final calculation: $100,000 - $10,000 - $4,150 - $1,200 - $25,526 - $1,800 = $57,324/year

Monthly take-home: $57,324 ÷ 12 = $4,777/month

Your $100K salary becomes $4,777/month in reality.

Real Examples by State

Same $100K salary, different states:

Example 1: California (High Tax)

• Federal + FICA: -$21,326
• California state: -$4,200
• Pre-tax deductions: -$15,350
• Take-home: ~$59,124/year ($4,927/month)

Example 2: Texas (No State Tax)

• Federal + FICA: -$21,326
• State tax: $0
• Pre-tax deductions: -$15,350
• Take-home: ~$63,324/year ($5,277/month)

Example 3: New York (High Tax + NYC)

• Federal + FICA: -$21,326
• New York state: -$4,800
• NYC city tax: -$3,800
• Pre-tax deductions: -$15,350
• Take-home: ~$54,724/year ($4,560/month)

The difference: Texas vs NYC = $717/month more ($8,600/year) on the same $100K salary!

Compare all 50 states now →

Common Mistakes People Make

Mistake 1: Forgetting About Medicare

People remember to account for Social Security (6.2%) but forget Medicare (1.45%). That's an extra $1,450 on $100K.

Mistake 2: Using Old Tax Brackets

Tax brackets change annually. Always use current year rates (2025 in this example).

Mistake 3: Not Accounting for Local Taxes

If you work in NYC, Philadelphia, Detroit, or other cities with local tax, you're losing another 2-4% you might not expect.

Mistake 4: Confusing Marginal vs Effective Tax Rate

Your top bracket (marginal rate) isn't what you pay on all your income. On $100K, you might be in the 22% bracket, but your effective rate is only ~16%.

Mistake 5: Ignoring Pre-Tax Savings Benefits

Every $1 you put in 401(k)/HSA saves you $0.22-0.37 in taxes (depending on your bracket). It's not just savings - it's instant ROI.

How to Increase Your Take-Home Pay

Strategy 1: Maximize Pre-Tax Contributions

• Max out 401(k): $23,000 in 2025
• Use HSA if eligible: $4,150 (individual)
• Contribute to FSA: $3,200 for healthcare

Tax savings on $100K salary:

• Contributing $27,150 to pre-tax accounts
• Saves you ~$5,974 in federal taxes (22% bracket)
• Plus state tax savings of ~$1,357 (CA)
• Total tax reduction: $7,331

You're paying $7,331 less in taxes while saving $27,150 for retirement/healthcare!

Strategy 2: Move to a Lower-Tax State

We showed this above: Texas saves you $4,200/year vs California.

Over 10 years, that's $42,000 more in your pocket (same job, same salary).

Strategy 3: Optimize Your Filing Status

• Married Filing Jointly: Lower tax rates than single
• Head of Household: Better than single if you qualify
• Adjust W-4 withholdings: Get more per paycheck (but be careful of tax bill at year-end)

Strategy 4: Increase Your Gross Salary

Obviously, but how much do you need to increase to hit your take-home goal?

Example: You want $6,000/month take-home (California)

• After taxes (~27%), you need $8,219 gross/month
• Annual salary needed: ~$98,630

Use this formula:

Desired Take-Home ÷ (1 - Tax Rate %) = Required Gross

Strategy 5: Negotiate Benefits, Not Just Salary

Sometimes benefits are worth more than salary increases:

Example:

• $5,000 salary increase = ~$3,650 after taxes
• $5,000 in employer 401(k) match = full $5,000 value (no taxes now)
• $3,000 in HSA employer contribution = full $3,000 + tax savings

Use a Calculator (Save Hours of Math)

Calculating take-home pay manually takes 30+ minutes and requires:

• Knowledge of current tax brackets
• State-specific tax rules
• FICA limits and thresholds
• Local tax rates
• Proper marginal vs effective rate calculations

The easier way: Use our free calculator

Enter your:

• Salary
• State
• Filing status
• Deductions

Get instant results showing:

• Monthly take-home pay
• Annual net income
• Effective tax rate
• Breakdown of all deductions
• Comparison to other states

Try it now - it's free →

Key Takeaways

✅ Your gross salary ≠ your take-home pay. Expect to lose 20-35% to taxes and deductions.

✅ State matters hugely. Same $100K salary = $717/month difference between Texas and NYC.

✅ Pre-tax deductions are powerful. Every $1 in 401(k)/HSA saves you $0.22-0.37 in taxes.

✅ Know your effective rate. Your top tax bracket isn't what you pay on all income.

✅ Local taxes exist. 14+ cities charge 2-4% income tax on top of state/federal.

✅ Use tools to save time. Calculating manually is complex and error-prone.

Conclusion

Understanding your take-home pay is critical for:

• Budgeting: Know your actual monthly income
• Job offers: Compare real compensation, not just gross salary
• Relocation: See how much moving could save you
• Retirement planning: Understand what you'll actually receive
• Salary negotiation: Ask for the right gross to hit your net goal

The math can be complex, but the concept is simple: know what you'll actually take home before making major financial decisions.

Next step: Calculate your exact take-home pay across all 50 states →

Compare your current state to potential new states and see exactly how much you'd gain or lose. It's free, takes 30 seconds, and might save you thousands per year.