Gross Pay vs Net Pay: What’s the Difference?
Understand gross pay vs net pay, what comes out of a paycheck and how to estimate the amount you actually take home.
Gross pay is what you earn before deductions. Net pay is what remains after taxes, benefits and other payroll deductions. The difference between the two explains why a $70,000 salary does not mean $70,000 lands in your bank account.
What is gross pay?
For salaried employees, gross pay starts with annual salary divided by the number of pay periods. For hourly workers, it is usually hourly rate multiplied by hours worked, plus overtime or other earnings when applicable.
What is net pay?
Net pay is the final paycheck amount after withholding. Common deductions include federal income tax, Social Security, Medicare, state income tax, local tax, health insurance and retirement contributions.
| Pay term | Meaning |
|---|---|
| Gross pay | Pay before taxes and deductions |
| Taxable wages | Wages subject to a particular tax after applicable adjustments |
| Net pay | Amount left after deductions |
Why gross-to-net pay varies
Two workers with the same salary can have different net pay because of filing status, state, benefit elections, retirement contributions and additional withholding. Pay frequency also changes the size of each individual check.
Estimate gross pay vs take-home pay
Use the salary after tax calculator for annual salary scenarios or the paycheck calculator when you want to model each pay period. If you are paid hourly, the hourly to salary calculator can translate hourly wages into annual gross income before you estimate taxes.
Gross vs net pay FAQ
Is gross pay before tax?
Yes. Gross pay is generally the starting amount before withholding and payroll deductions.
Can net pay be used to compare job offers?
It can be more useful than gross salary alone because it reflects state taxes and common payroll deductions, but benefits, bonuses and employer contributions also matter.