How to Calculate Your Take-Home Pay After Taxes

When you accept a job offer for $75,000, you will not receive $75,000. Federal income tax, Social Security, Medicare, state taxes, and voluntary deductions all take their share before your paycheck reaches your bank account. Understanding exactly how much you take home is essential for budgeting, evaluating job offers, and planning your financial life. This guide walks you through every deduction that stands between your gross salary and your net pay in 2026.

What Is Take-Home Pay?

Take-home pay, also called net pay, is the amount of money deposited into your bank account after all taxes and deductions have been withheld from your gross pay. It is the money you actually have available to spend, save, and invest.

Your gross pay is the total compensation your employer pays you before any deductions. The gap between gross and net pay can be substantial. A worker earning $75,000 gross might take home only $55,000 to $60,000 depending on their tax situation, state of residence, and benefit elections. That 20% to 27% difference makes understanding paycheck deductions critical for accurate financial planning.

Gross Pay vs Net Pay

Gross pay is the headline number on your offer letter or employment contract. For salaried workers, it is the annual salary divided by the number of pay periods. For hourly workers, it is hours worked multiplied by the hourly rate, plus any overtime.

Net pay is gross pay minus all mandatory and voluntary deductions. The deductions fall into two categories: taxes (which are required by law) and benefits (which are often voluntary but reduce taxable income). The formula is:

What Gets Deducted From Your Paycheck

Federal Income Tax

The largest deduction for most workers is federal income tax. Your employer withholds an estimated amount each pay period based on the information you provided on Form W-4 (filing status, dependents, additional withholding). The actual tax owed is determined when you file your return, and any difference results in a refund or balance due.

For 2026, the seven federal tax brackets for single filers range from 10% on the first $12,400 of taxable income up to 37% on taxable income above $640,600. The standard deduction is $16,100 for single filers and $32,200 for married filing jointly. Your effective federal tax rate (the average rate across all brackets) typically falls between 10% and 22% for most workers.

Social Security Tax (FICA)

Social Security tax is 6.2% of your gross wages, withheld on earnings up to the 2026 wage base of $184,500. Once you earn $184,500 in a calendar year, no additional Social Security tax is withheld for the rest of that year. Your employer pays a matching 6.2%, for a combined rate of 12.4%.

For a worker earning $75,000, Social Security tax is $75,000 × 6.2% = $4,650 per year, or about $179 per biweekly paycheck.

Medicare Tax

Medicare tax is 1.45% of all gross wages with no wage cap. Your employer matches this for a combined 2.9%. Additionally, the Additional Medicare Tax of 0.9% applies to wages exceeding $200,000 for single filers ($250,000 for married filing jointly). This additional tax is paid only by the employee; the employer does not match it.

For a worker earning $75,000, Medicare tax is $75,000 × 1.45% = $1,087.50 per year.

State and Local Income Tax

Forty-three states impose some form of income tax, ranging from flat rates (such as 4.95% in Illinois) to highly progressive systems (California's top rate of 13.3%). Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire taxes only interest and dividend income.

Some cities impose additional local income taxes. New York City residents pay a local income tax of 3.078% to 3.876% on top of state taxes. Understanding your state and local tax burden is critical because it can add 3% to 13% to your total tax rate.

Pre-Tax Deductions

Pre-tax deductions reduce your taxable income before federal and sometimes FICA taxes are calculated. Common pre-tax deductions include traditional 401(k) contributions (up to $24,500 in 2026, or $32,500 if age 50+), health insurance premiums, HSA contributions, FSA contributions, and commuter benefits. These deductions simultaneously reduce your current tax bill and lower your take-home pay, but the tax savings mean the net cost is less than the face value of the deduction.

Step-by-Step Take-Home Pay Calculation

Let's calculate the annual take-home pay for a single filer earning $85,000 in a state with no income tax (like Texas), contributing $5,000 to a traditional 401(k) and $2,400 to health insurance premiums annually.

Step 1: Calculate taxable income for federal purposes.

Gross salary: $85,000. Subtract pre-tax 401(k): $85,000 − $5,000 = $80,000. Subtract standard deduction: $80,000 − $16,100 = $63,900 taxable income.

Step 2: Calculate federal income tax.

• 10% on first $12,400 = $1,240
• 12% on $12,401 to $50,400 ($38,000) = $4,560
• 22% on $50,401 to $63,900 ($13,500) = $2,970

Total federal tax: $8,770

Step 3: Calculate Social Security tax.

$85,000 × 6.2% = $5,270 (full salary is below the $184,500 wage base).

Step 4: Calculate Medicare tax.

$85,000 × 1.45% = $1,232.50 (no Additional Medicare Tax since income is below $200,000).

Step 5: Calculate take-home pay.

$85,000 − $8,770 (federal tax) − $5,270 (SS) − $1,233 (Medicare) − $5,000 (401k) − $2,400 (health) = $62,327 annual take-home pay.

That translates to approximately $2,397 per biweekly paycheck (26 pay periods) or $5,194 per month. The total deductions of $22,673 represent 26.7% of gross pay.

Real-World Examples

Example 1: Entry-Level Worker. Angela earns $48,000 as a customer service representative in Florida. She contributes nothing to a 401(k) and pays $1,800 per year for health insurance. After the standard deduction, her taxable income is $30,100. Her federal tax is roughly $3,364. Social Security is $2,976, and Medicare is $696. Her annual take-home pay is approximately $39,164, or about $1,506 per biweekly paycheck. She takes home about 81.6% of her gross pay.

Example 2: Dual-Income Household. Kevin and Maria file jointly with a combined gross income of $160,000. They live in Colorado (flat 4.4% state tax) and each contribute $10,000 to their 401(k)s. Their combined pre-tax retirement contributions total $20,000. After the $32,200 standard deduction, their federal taxable income is $107,800. Federal tax is approximately $14,540. Social Security is $9,920 combined ($160,000 × 6.2%), Medicare is $2,320, state tax is roughly $6,160, and health insurance is $6,000. Their combined take-home pay is approximately $101,060, or about $8,422 per month. They keep 63.2% of gross pay.

Example 3: High Earner. Nathan earns $220,000 as a senior engineer in California. He maximizes his 401(k) at $24,500 and pays $4,800 in health premiums. His California state income tax on this income is approximately $14,300. Federal taxable income after the standard deduction and 401(k) is $179,400. Federal tax is approximately $35,670. Social Security is $11,439 (capped at $184,500 wage base), Medicare is $3,190 (including $180 Additional Medicare Tax on the $20,000 above $200,000). His take-home pay is approximately $126,101, or about $4,850 per biweekly paycheck. He keeps 57.3% of his gross pay.

Salary vs Hourly Take-Home Pay

Salaried employees receive the same gross pay each pay period regardless of hours worked. Their take-home pay is predictable and consistent, making budgeting straightforward.

Hourly employees may see their take-home pay fluctuate based on hours worked and overtime. Overtime is paid at 1.5 times the regular rate for hours exceeding 40 per week under the Fair Labor Standards Act. These extra dollars are taxed at your marginal rate, not a special overtime rate, but the higher gross pay may push some income into the next bracket.

To estimate annual take-home pay from an hourly rate, multiply by 2,080 (40 hours × 52 weeks) for a full-time equivalent, then apply the deduction steps outlined above. For example, $25/hour × 2,080 = $52,000 gross annual salary, from which you would calculate taxes and deductions normally.

How to Increase Your Take-Home Pay

There are several legitimate strategies to increase the amount that reaches your bank account each pay period:

Adjust your W-4. If you consistently receive large tax refunds ($2,000+), you are over-withholding throughout the year. Use the IRS Tax Withholding Estimator to recalibrate your W-4 and increase each paycheck. A $3,000 refund translates to an extra $115 per biweekly paycheck that you could be using or investing throughout the year.

Contribute to an HSA instead of paying out-of-pocket. HSA contributions reduce federal income tax and FICA taxes (if deducted through payroll), giving you a bigger effective pay increase than an equivalent post-tax savings contribution.

Use a Dependent Care FSA. If you pay for childcare, contributing up to $5,000 to a Dependent Care FSA reduces your taxable income, saving you money at your marginal rate plus FICA taxes.

Review benefit elections annually. Overpaying for insurance coverage you do not use (dental, vision, supplemental life) directly reduces take-home pay. During open enrollment, evaluate whether your current benefit elections still match your needs.

Negotiate pre-tax benefits. Commuter benefits, education reimbursement, and employer HSA contributions all increase your total compensation without increasing your tax burden, effectively boosting take-home pay.

Last updated: February 23, 2026