Why is my take-home pay less than my salary?

Because taxes, Social Security, Medicare, and any pre-tax deductions like a 401(k) or health insurance come out before you are paid. The difference between gross and net is normal.

What do the deductions on my paycheck mean?

Federal and state income tax, FICA for Social Security and Medicare, and voluntary deductions like retirement or insurance. Your pay stub should list each one separately.

How do I check if my paycheck is correct?

Compare the hours, rate, and deductions on the stub to what you expect, and verify the withholdings match your filed status. The Paycheck Calculator models the breakdown.

Understanding Your Paycheck: Where the Money Goes

Key takeaway

Build your budget around net pay, and use pre-tax contributions to lower the income your tax is based on.

The salary on the offer is not what you take home

A $60,000 salary does not mean $60,000 in your bank account. By the time the money reaches you, a chunk has already gone to taxes and benefits, and the gap surprises a lot of first-time workers. Knowing what each deduction is, and roughly how big it should be, makes your real budget far easier to plan.

Your paycheck has two headline numbers: gross pay and net pay. Gross is what you earned before anything comes out. Net, or take-home, is what is left after deductions. Everything interesting happens in the space between them.

What gets taken out, and in what order

Deductions generally fall into three buckets.

First come pre-tax deductions: contributions to a traditional 401(k), health insurance premiums, an HSA or FSA. These come out before taxes are figured, which lowers the income your tax is based on.

Next is federal income tax withholding. Your employer estimates the tax you will owe for the year and holds back a slice of each check toward it. The amount depends on your salary and the choices on your Form W-4.

Then come FICA taxes, which fund Social Security and Medicare. Social Security takes 6.2% of wages up to an annual cap, and Medicare takes 1.45% with no cap. These are flat percentages, so they are easy to predict: on $60,000, FICA alone is about $4,590 a year.

If you live somewhere with state or local income tax, that comes out too. This guide sticks to the federal side, but the state portion can be significant depending on where you work.

A worked example: $60,000 to take-home

Start with $60,000 gross. Send $5,000 to a traditional 401(k) pre-tax, so taxable pay drops to $55,000. FICA takes about $4,590 across the year. Federal withholding on the remaining income might run around $6,000 depending on your W-4, and Social Security and Medicare come out on top. After pre-tax contributions, taxes, and FICA, net pay lands near $44,000 a year — or roughly $1,670 every two weeks on a 26-pay schedule. The exact withholding varies, but the point is that "take-home" is often 70% to 75% of gross once retirement contributions are included.

Why pre-tax contributions stretch further

A dollar you send to a traditional 401(k) does not cost you a full dollar of take-home pay, because that dollar was never taxed. If you are in the 22% bracket, contributing $100 reduces your paycheck by closer to $78 after the tax you would have paid is accounted for.

That is why financial advice leans so hard on workplace retirement and HSA contributions. They lower your current tax bill while building savings, and the effect compounds over a career.

Overtime, bonuses, and how they are taxed

A raise is never taxed so heavily that you take home less — the marginal system guarantees that. Bonuses and overtime, though, are often withheld at a flat supplemental rate, which can make a bonus check look smaller than expected. That is withholding, not the final tax. Over the year the bonus is netted against your actual bracket, and any over-withholding comes back as a refund. The lesson is to plan your budget around regular net pay, not a bonus you may not see in full.

When your withholding is wrong

Withholding is an estimate, and estimates drift. If you got a large refund last year, that is not free money; it means too much was withheld and you lent the government cash interest-free all year. Owe a big bill instead, and not enough came out.

A few life events throw withholding off:

a raise, bonus, or second job
getting married or divorced
a new child or other dependents
significant freelance income on the side

After any of these, it is worth updating your W-4 or running a paycheck estimate to see whether the new numbers still land where you want. The earlier in the year you fix it, the more pay periods there are to spread the correction across.

Use the year-to-date column

Beyond the current period, your stub shows year-to-date (YTD) totals for each deduction. The YTD view is the easiest way to confirm that your 401(k) is on track for the annual limit and that year-to-date taxes look reasonable versus last year. If YTD federal withholding is far ahead of or behind the same point last year, that is an early signal your W-4 may need a tweak.

Reading a real pay stub

When you actually look at a stub, match each line to one of the buckets above. Confirm the gross matches your expected salary divided by the number of pay periods. Check that Social Security and Medicare are the flat percentages they should be. If a deduction looks off, ask payroll early; correcting it sooner is always easier than untangling a year of mistakes at tax time.

Take-home pay is the number your budget actually runs on, so build your spending plan around net pay, not the gross figure on your offer letter.

To put your own numbers in, the Paycheck Calculator estimates take-home pay after federal tax and FICA. The Salary Calculator converts between hourly and annual pay, and the Income Tax Calculator shows how the federal tax portion is figured.