Guide

Reading a paycheck: gross vs net

By Alex Rivera · Last reviewed: 2026-10-02

Educational estimate only. This guide is educational only. It is not tax advice, a payroll audit, or a promise of any exact tax bill or net amount. Withholding depends on Form W-4, Pub 15-T methods, FICA rules, state and local taxes, benefits elections, and employer setup. Use current payroll software, Pub 15-T, or the IRS Tax Withholding Estimator for estimates—not a substitute for payroll software or a tax professional. See the full disclaimer.

Last reviewed: 2026-10-02. Confirm figures against official IRS / DIR sources before filing or paying.

Related calculator: 1099 vs W-2 educational comparison

A paycheck stub is a short story about two numbers people confuse constantly: gross pay and net pay. Gross is what you earned before the stub’s deductions. Net (“take-home”) is what lands in your account after taxes and other amounts come out. Learning the anatomy helps you spot errors, plan cash flow, and ask better questions—without mistaking an estimate for an IRS bill.

Gross pay: the starting line

Gross pay for a period is the total wages earned before deductions. Depending on how you are paid, gross may include:

  • Hourly wages (hours × rate), including overtime premiums
  • Salary amounts for the pay period
  • Commissions, nondiscretionary bonuses, shift differentials
  • Taxable fringe benefits the employer must include

For California nonexempt hourly workers, overtime and double-time premiums increase gross before taxes. See How California daily overtime works and Double time in California. Overtime mistakes change gross first; taxes follow.

Example (hourly, educational): Regular rate $20. Week with 40 straight-time hours and 5 overtime hours at 1.5× under a simple weekly-only story for illustration: Gross = (40 × $20) + (5 × $30) = $800 + $150 = $950. (California daily rules might change which hours are premium—use the CA overtime calculator when CA daily bands matter.)

Net pay: what you actually receive

Net pay = gross pay − deductions (taxes and other amounts). Direct deposit and the check amount should match net for that stub (timing quirks and corrections aside).

If gross is $950 and total deductions are $280, net is $670. People budgeting from gross alone overspend.

Paystub anatomy (typical lines)

Stubs vary by payroll provider, but many share a common skeleton:

Earnings section

  • Regular hours / rate / amount
  • Overtime / double time
  • Bonuses, commissions, PTO paid
  • Gross pay total for the period
  • YTD (year-to-date) gross

Tax deductions (common federal)

  • Federal income tax withholding — based on Form W-4 and employer methods (see Pub 15-T plain English)
  • Social Security tax (employee share) — generally 6.2% of covered wages up to the annual Social Security wage base
  • Medicare tax (employee share) — generally 1.45% of covered wages (Additional Medicare Tax may apply above IRS thresholds for higher earners)

Together, the employee Social Security + Medicare shares are often called FICA employee withholding (7.65% combined within wage-base rules). For 2026, SSA published a Social Security wage base of $184,500—verify on SSA’s contribution and benefit base page.

State and local tax lines

  • State income tax withholding (for example, California FTB schedules when applicable)
  • Local income taxes, city/county taxes, disability insurance contributions (names vary by state—California SDI is a common stub line)

Benefit and other deductions

Split these mentally into pre-tax and post-tax when the stub labels allow.

Pre-tax vs post-tax deductions

Pre-tax deductions generally reduce taxable wages for federal income tax withholding (and sometimes for FICA, depending on the benefit). Common educational examples:

  • Traditional 401(k) elective deferrals (plan rules apply)
  • Section 125 cafeteria plan premiums for health insurance in many setups
  • Health Savings Account contributions in eligible arrangements

Post-tax deductions come out after income tax withholding is computed on the relevant wage base. Common educational examples:

  • Roth 401(k) deferrals
  • Charitable donations via payroll
  • Some union dues arrangements
  • Wage garnishments (priority rules apply)

Why the distinction matters: Two employees with the same gross can have different federal withholding and different net pay if one shelters more through pre-tax benefits. The stub’s “taxable wages” box for federal income tax may be lower than gross.

Tiny illustration: Gross $3,000 semi-monthly. Pre-tax health + 401(k) totaling $400. Federal income-tax withholding is computed on a lower wage figure than $3,000 (exact method per Pub 15-T / payroll system). FICA wage bases may also differ by benefit type—do not assume every pre-tax item reduces every tax.

Employer-paid amounts you may not see as “your” deduction

Employers also pay an employer share of Social Security and Medicare on covered wages, plus unemployment taxes (FUTA/SUTA themes), and possibly benefits contributions. Those employer costs are not usually subtracted on your net line as employee deductions—but they are real labor costs. This is one reason W-2 vs 1099 cash comparisons mislead when people stare only at gross—see 1099 vs W-2: taxes and paperwork.

YTD columns: your mid-year reality check

Year-to-date figures help you spot:

  • Social Security withholding that should stop (or slow) after wages pass the annual wage base
  • Bonus spikes that changed withholding
  • Missing overtime premiums relative to hours you recorded
  • Benefit deductions that started or stopped mid-year

If YTD Social Security looks wrong relative to YTD Social Security wages, ask payroll—politely, with numbers.

Hourly workers: reconcile hours before you argue taxes

Before debating withholding, confirm hours and rates:

  1. Regular hours × regular rate
  2. OT / double-time hours × correct premium rates
  3. Shift differentials
  4. PTO hours paid

California workers should compare long days against §510 bands. A “tax problem” is sometimes an earnings problem. Tools: /calculators/ca-overtime/.

Salaried stubs still need reading

Salary does not magically erase overtime for nonexempt employees, nor does it erase withholding complexity. Exempt status is a legal test. If you are nonexempt salaried, overtime may still appear as additional earnings lines.

Spotting stub errors worth a payroll email

Educational red flags (ask politely; bring numbers):

  1. Overtime hours on your timesheet missing from earnings — fix gross before debating tax.
  2. Social Security wage YTD far above the annual wage base while SS tax still withholds at 6.2% — after the wage base, SS employee tax should stop for that employer relationship (Medicare continues).
  3. Pre-tax benefit elected but still missing — taxable wages may be too high.
  4. Extra withholding you requested on W-4 Step 4(c) not appearing — confirm payroll received the form.
  5. Net deposit ≠ stub net — bank timing or partial correction; reconcile before assuming theft of wages.

Keep PDFs or screenshots of stubs. Year-end W-2 disagreements are harder without period records.

Offer letters vs stubs

Job offers quote gross salary or hourly rates. Your rent is paid with net. When comparing offers, estimate taxes and benefits cost sharing—not just headline gross. Use the IRS Tax Withholding Estimator or payroll software for that educational gap analysis; the 1099 vs W-2 calculator covers a separate simplified comparison. Neither output is a contract or a tax bill.

How to think about net-pay estimates

A net-pay estimate is a planning aid, not a tax bill. For current estimates, use payroll software, Pub 15-T, or the IRS Tax Withholding Estimator. Simplified estimates can omit state and local taxes, benefits, and other payroll details. Good uses:

  • Ballpark net for a job offer
  • Seeing how pre-tax deductions change estimated net
  • Learning which levers matter

Bad uses:

  • Quoting the result as “my exact IRS bill”
  • Replacing payroll software
  • Ignoring state disability, local taxes, or benefits not modeled

Label every output as an estimate.

Worked stub walkthrough (fictional)

Facts: Biweekly stub. Gross earnings $2,400. Pre-tax 401(k) $120. Pre-tax health premium $80. Employee Social Security $136.40 (illustrative on FICA wages). Employee Medicare $31.90. Federal income tax withholding $210 (illustrative). State income tax $90 (illustrative). Post-tax parking $25.

Educational arithmetic:

  • Gross: $2,400
  • Pre-tax deferrals: $200 → affects taxable wages for income tax in many systems
  • Employee FICA lines: $136.40 + $31.90 = $168.30
  • Income tax withholdings (fed + state illustrative): $300
  • Post-tax parking: $25
  • Approximate net sketch: $2,400 − $200 − $168.30 − $300 − $25 = $1,706.70

Your real stub may group lines differently. The lesson is the order of concepts: gross → pre-tax → tax withholdings on appropriate bases → post-tax → net.

Related MileagePayTools guides and tools

Official sources

FAQ

Why is my friend’s net higher on the same gross?

Different W-4 entries, pre-tax benefits, state residency, additional withholding, garnishments, or Social Security wage-base interactions. Gross equality does not imply net equality.

Is net pay what I report on my tax return?

Not as a single number. Your Form W-2 reports wages and withholding. Your Form 1040 computes tax on taxable income with credits. Withholding is a prepayment, not the final tax.

Do contractors get stubs like this?

Often not. Many contractors invoice and receive gross payments, then handle estimated taxes themselves—see the quarterly taxes intro.

Can overtime push me into a “higher tax bracket” on the whole salary?

Withholding methods estimate tax for a pay period; final tax uses annual rules. A big OT check can withhold at a high period rate without meaning every dollar of annual income permanently moved brackets. Use IRS withholding resources and a professional for planning—not paycheck panic.

Bottom line

Gross is earned pay before stub deductions; net is what you take home after taxes and other amounts. Read earnings first (especially overtime), then separate pre-tax and post-tax deductions, then check federal income tax and FICA employee shares against your W-4 and benefit elections. For current paycheck estimates, use payroll software or the IRS Tax Withholding Estimator—never treat an estimate as a guaranteed tax bill.