How to Calculate My Net Pay from My Gross Salary (2025 Guide)

Your salary on paper is never the same as the amount that shows up in your bank account. That’s because what you earn—your gross salary—gets reduced by taxes and deductions before you receive it as net pay. Social Security, Medicare, federal withholding, state taxes, retirement contributions, and health insurance all play a part in lowering your take-home pay.

If you’ve ever wondered, “How do I calculate my net pay from my gross salary?”, this guide breaks it down step by step. Whether you’re paid hourly or on a fixed salary, understanding how deductions and allowances work will help you predict your paycheck more accurately and budget with confidence.

What Is Net Pay vs Gross Salary?

• Gross salary is the total amount you earn before taxes and deductions.
• Net pay (or take-home pay) is what you actually receive after taxes, Social Security, Medicare, and other deductions.

Knowing the difference helps you budget more accurately and prevents surprises on payday.

Step-by-Step: How to Go from Gross Salary to Net Pay

Step 1 — Find Your Gross Pay

• Salary workers: Divide annual salary by the number of pay periods (monthly, bi-weekly, semi-monthly).
• Hourly workers: Multiply hourly wage × hours worked, plus overtime or bonuses.

Step 2 — Subtract Pre-Tax Deductions

Pre-tax deductions reduce your taxable income. Examples include:

• 401(k) or 403(b) retirement contributions
• Health, dental, or vision insurance premiums
• HSA or FSA contributions

These don’t lower Social Security or Medicare, but they do reduce federal and state withholding.

Step 3 — Apply FICA (Social Security & Medicare)

For 2025:

• Social Security: 6.2% up to $176,100 of wages
• Medicare: 1.45% on all wages
• Additional Medicare tax: 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly)

Step 4 — Estimate Federal Income Tax

• Start with taxable wages after pre-tax deductions.
• Subtract the 2025 standard deduction ($15,000 single, $30,000 married filing jointly).
• Apply IRS tax brackets for your filing status.
• Spread the annual withholding across your paychecks.

Step 5 — Account for State and Local Taxes

• Some states (Texas, Florida, Alaska) have no state income tax.
• Others, like California and New York, apply progressive rates.
• Certain cities (New York City, Philadelphia) also add local income tax.

👉 If you want to see the difference, try the California paycheck calculator or the NYC bi-weekly estimator.

Step 6 — Subtract Post-Tax Deductions

These come out after taxes:

• Roth 401(k) contributions
• Union dues
• Wage garnishments
• Charitable payroll deductions

Step 7 — Arrive at Net Pay

Formula recapNet Pay = Gross Salary
– Pre-Tax Deductions
– FICA Taxes
– Federal Income Tax
– State & Local Taxes
– Post-Tax Deductions

Worked Example

Imagine a bi-weekly paycheck of $3,000 gross:

• 5% 401(k): –$150
• Taxable wages: $2,850
• FICA (SS + Medicare): –$229
• Federal withholding: –$260 (single filer, 1 allowance)
• State tax (CA example): –$150
  Net pay ≈ $2,211

If the same worker claimed 0 allowances, federal withholding would be higher, and the paycheck would shrink.

FAQs

What is the net pay formula?
Net pay = Gross pay minus deductions, taxes, and withholdings.

Do pre-tax deductions lower my taxable income?
Yes, contributions like 401(k) and HSA reduce federal and state taxable wages.

Do allowances still exist on W-4?
The 2020 W-4 replaced allowances with dependents and adjustments, but the effect is similar—fewer taxes withheld means more take-home pay.

Does pay frequency change net pay?
Your annual total is the same, but each paycheck amount changes depending on whether you’re paid weekly, bi-weekly, or monthly.

How do bonuses affect net pay?
Employers usually withhold at a flat supplemental rate, but it still flows through the same deductions.