Know Your Real
Take-Home Pay

Gross pay is your total earnings before any deductions — the number in your offer letter. Take-home pay (net pay) is what actually hits your bank account after federal income tax, state income tax, Social Security, Medicare, and any pre-tax deductions like 401(k) are removed. For most workers the gap is 20–35% of gross.

Because the US uses a progressive tax system. Each dollar of income is taxed at the rate for its bracket — not your entire income at the top rate. A raise pushes only the additional dollars into a higher bracket. So a $10,000 raise in the 22% federal bracket actually costs $2,200 in federal tax, and you keep the rest.

FICA stands for the Federal Insurance Contributions Act — it funds Social Security (6.2% on wages up to $176,100) and Medicare (1.45% on all wages). Self-employed people pay both the employee and employer share (15.3% combined). Most employees cannot opt out, but some religious groups, student workers, and certain government employees are exempt.

Pre-tax deductions reduce your taxable income before federal and state taxes are calculated, so you don't pay tax on that money now. A $500/month 401(k) contribution in the 22% bracket only reduces your take-home by about $390 — the government effectively subsidises $110 of it. This is why financial advisors say contributing at least up to your employer match is almost always worth it.

Significantly. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no state income tax. On a $75,000 salary, moving from California (top bracket ~9.3%) to Texas (0%) can mean $4,000–$7,000 more in take-home pay annually, though cost of living differences may offset that.

They use 2025 IRS tax tables and state income tax schedules and are accurate for standard W-2 employees. They don't account for local taxes (common in NYC, Philadelphia, and parts of Ohio), the Alternative Minimum Tax (AMT), tax credits (child tax credit, education credits), or self-employment income. For complex situations, consult a tax professional.