How to Calculate Your True Take-Home Pay: A Step-by-Step Guide
Most people only know their gross salary, but your actual take-home pay can be 25-35% less after taxes and deductions. Learn exactly how to calculate what hits your bank account.
💡 Quick Formula
Take-Home Pay = Gross Pay - Federal Tax - State Tax - FICA (7.65%) - Other Deductions
Understanding Gross vs Net Pay
Gross Pay is what your employer pays you before any deductions. Net Pay (take-home) is what actually deposits into your bank account.
📊 Example: $75,000 Salary
Annual Gross: $75,000
Monthly Gross: $75,000 ÷ 12 = $6,250
Federal Tax (15%): -$937
State Tax (5%): -$312
FICA (7.65%): -$478
Health Insurance: -$200
401(k) (6%): -$375
Monthly Net: $3,948
Take-home: 63% of gross
The 5 Major Deductions from Your Paycheck
1. Federal Income Tax (10-37%)
Federal tax uses a progressive bracket system. Your effective rate is different from your marginal rate:
2024 Federal Tax Brackets (Single Filer)
- 10% on income up to $11,000
- 12% on income $11,001 to $44,725
- 22% on income $44,726 to $95,375
- 24% on income $95,376 to $182,100
Example: $75,000 salary doesn't mean 22% tax on all $75K. You pay 10% on first $11K, 12% on next $33,725, and 22% on remaining $30,275. Effective rate: ~15%.
2. State Income Tax (0-13%)
9 states have NO state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
Other states range from 1% (Pennsylvania) to 13.3% (California highest bracket).
3. FICA Taxes (7.65%)
FICA is mandatory and funds Social Security and Medicare:
- Social Security: 6.2% on income up to $160,200 (2024 limit)
- Medicare: 1.45% on all income (no cap)
- Additional Medicare: 0.9% on income over $200,000
4. Health Insurance Premiums
Average employer-sponsored health insurance costs $200-500/month for individual coverage, $600-$1,500 for family coverage. Your employer typically covers 70-80%.
5. Retirement Contributions (401k, IRA)
Pre-tax 401(k) contributions reduce your taxable income. Contributing 6% of $75,000 = $4,500/year saves you ~$1,000 in taxes!
Step-by-Step Calculation Example
Complete Calculation: $100,000 Salary in California
Gross Annual Salary: $100,000
Gross Monthly: $100,000 ÷ 12 = $8,333
Deductions:
Federal Tax (18% effective): -$1,500
California State Tax (6%): -$500
Social Security (6.2%): -$517
Medicare (1.45%): -$121
Health Insurance: -$250
401(k) Pre-tax (8%): -$667
Dental/Vision: -$50
Monthly Take-Home: $4,728
Annual Net: $56,736 (57% of gross)
Common Mistakes in Calculating Take-Home Pay
❌ Using Wrong Tax Bracket
Many people think their entire income is taxed at their top bracket. Use effective tax rate, not marginal.
❌ Forgetting State Taxes
If you live in California, New York, or New Jersey, state taxes can take another 5-10%.
❌ Not Including Benefits
Health insurance, 401(k), FSA, and HSA contributions all reduce take-home pay.
How to Increase Your Take-Home Pay
- Adjust W-4 Allowances: If you get large tax refunds, you're giving the IRS an interest-free loan. Adjust withholdings to keep more each paycheck.
- Max Out Pre-Tax Accounts: 401(k), HSA, and FSA contributions reduce taxable income.
- Claim All Eligible Tax Credits: Child Tax Credit, Earned Income Tax Credit, education credits can boost net pay.
- Negotiate Gross Salary: A $5,000 raise increases take-home by ~$3,000 after taxes.
- Consider Remote Work in Low-Tax States: Moving from California to Texas can save 10%+ in state taxes.
Paycheck Frequency Impact
Monthly (12 paychecks/year)
$75,000 ÷ 12 = $6,250 gross
After 37% deductions = $3,938 net
Bi-Weekly (26 paychecks/year)
$75,000 ÷ 26 = $2,885 gross
After 37% deductions = $1,818 net
💡 Two "extra" paychecks per year!
💰 Calculate Your Exact Take-Home Pay
Use our free paycheck calculator with state-by-state tax rates and customizable deductions.
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