What Is Net Pay? How It's Calculated on Your Paycheck (2026)

Your pay stub shows a number at the top (gross) and a number at the bottom (net). The distance between them is everything you owe in taxes plus what you’ve chosen to set aside. Here’s how every dollar of that gap is calculated.

Net Pay: The Formula

Net Pay = Gross Pay − Mandatory Deductions − Voluntary Pre-Tax Deductions − Post-Tax Deductions

Or expanded:

Net Pay = Gross − Federal income tax withheld − Social Security (6.2% up to $176,100) − Medicare (1.45%, all wages) − State income tax − Pre-tax 401(k) / 403(b) − Pre-tax HSA / FSA contributions − Employer-sponsored health/dental/vision premiums − Roth 401(k) contributions − After-tax insurance, garnishments, other

Mandatory Deductions (No Opt-Out)

Federal Income Tax Withholding

Calculated by your employer using IRS withholding tables, based on your W-4. This is an estimate of your actual tax liability — you settle up at filing time.

FICA (Social Security + Medicare)

Tax	Rate	2026 Cap
Social Security	6.2%	First $176,100
Medicare	1.45%	No cap
Additional Medicare	0.9%	Over $200,000

FICA is applied to gross wages. It cannot be reduced by 401(k) contributions — but HSA contributions do reduce FICA because HSAs are typically established under a Section 125 cafeteria plan.

State Income Tax

Varies from 0% (nine states) to 13.3% (California top bracket). Applied to wages by your employer’s payroll system automatically based on your state of employment.

Voluntary Pre-Tax Deductions

These reduce your taxable income — meaning both less income tax AND (for some accounts) less FICA:

Deduction	2026 Limit	Reduces FICA?	Reduces Income Tax?
Traditional 401(k)	$23,500 ($31,000 age 50+)	Generally no*	Yes
HSA (single)	$4,300	Yes	Yes
HSA (family)	$8,550	Yes	Yes
FSA (healthcare)	$3,300	Yes	Yes
Dependent Care FSA	$5,000	Yes	Yes
Health/dental/vision	Employer plan	Yes (Section 125)	Yes

*Traditional 401(k) contributions are technically subject to FICA; the FICA savings depend on whether your plan runs through a Section 125 arrangement.

Voluntary Post-Tax Deductions

These come out after taxes — they don’t reduce your tax bill:

• Roth 401(k): Contributions are after-tax; withdrawals in retirement are tax-free
• After-tax life insurance: Premiums above the employer-provided $50K amount
• Union dues: Not tax-deductible for employees post-2017 (TCJA eliminated this)
• Wage garnishments: Court-ordered; typically for unpaid taxes, child support, or debt judgments
• Charitable payroll deductions: After-tax but may be deductible if you itemize

Real Example: $5,000 Gross → Net Pay

$5,000 semi-monthly paycheck, single, Texas, 6% 401(k), health insurance

Line Item	Amount	Running Total
Gross Pay	$5,000	$5,000
Federal income tax	−$509	$4,491
Social Security (6.2%)	−$310	$4,181
Medicare (1.45%)	−$72.50	$4,109
State income tax (TX)	$0	$4,109
401(k) 6% pre-tax	−$300	$3,809
Health insurance premium	−$250	$3,559
Net Pay		$3,559

The gap: $5,000 gross → $3,559 net = $1,441 in deductions (28.8% of gross).

If this worker also contributes to a Roth IRA through payroll ($100/period post-tax), the actual bank deposit would be $3,459 — but “net pay” on the stub would still show $3,559.

Why “Net Pay” ≠ Take-Home in All Cases

The confusion happens with post-tax items. If your pay stub shows:

• Net Pay: $3,559
• Roth 401(k) deduction: −$200
• Actual deposit: $3,359

The $3,559 is “net pay after taxes.” The $3,359 is your actual take-home. Both are valid numbers for different purposes — just know which one you’re working with when budgeting.

Use the paycheck calculator to model any combination of deductions and see your estimated net pay for your exact income, state, and benefit elections.