Gross pay is what you earn before payroll deductions. Net pay is what remains after applicable taxes and other deductions.
The difference in one glance
Think of your paycheck as a journey. Your earnings start as gross pay. Payroll taxes and other deductions are then taken out, leaving the amount you actually receive: net pay.
Gross Pay
The total earnings you receive before applicable taxes and other payroll deductions.
Net Pay
The amount left after applicable taxes and deductions are withheld from your earnings.
Where does the difference go?
The gap between gross pay and net pay can include federal income tax withholding, Social Security and Medicare taxes, state or local taxes where applicable, and other payroll deductions.
What counts as gross pay?
Gross pay generally represents the earnings attributed to your work before applicable payroll deductions. Depending on how you're paid, that can include more than your normal hourly or salary amount.
Your normal hourly earnings or salary.
Additional earnings from eligible overtime work.
Bonuses, commissions and certain other compensation.
What is deducted before you receive your pay?
Your employer may withhold several types of taxes and deductions from your paycheck. The exact combination depends on your circumstances and payroll elections.
Federal withholding is influenced by your earnings and Form W-4 information.
Employee payroll tax withheld from applicable wages.
Benefits, retirement contributions and other authorized deductions can also affect net pay.
How is net pay calculated?
The basic relationship is straightforward:
Actual payroll calculations can be more complicated because different taxes and deductions can apply to different types of compensation.
Gross pay vs net pay example
Imagine an employee earns $2,500 during a particular pay period.
Gross pay
This is the employee's earnings before the deductions shown in this example.
Net pay
This is the amount remaining after $600 of example taxes and deductions.
This is a simplified illustration, not a tax calculation. Actual withholding varies by employee, pay period, location, tax elections and deductions.
Why two people can have the same gross pay but different net pay
Gross pay alone doesn't tell you exactly how much will reach your bank account.
Two employees earning the same amount can have different net pay because their withholding and payroll deductions may not be identical.
Form W-4 information can affect federal income tax withholding.
Health insurance and other employee benefits can change deductions.
Contributions to workplace retirement plans can affect current take-home pay.
Which number should you use for your budget?
For everyday budgeting, net pay is usually the more useful number because it represents the amount available after payroll deductions.
Gross pay is still important when comparing salaries, evaluating compensation and understanding your total earnings.
Use gross pay for
Comparing salaries, understanding earnings, reviewing compensation and estimating annual wages.
Use net pay for
Budgeting, planning expenses and estimating the money you'll actually receive.
Want to see your actual paycheck estimate?
Enter your pay, location and deductions in the PaycheckMint calculator to estimate taxes and take-home pay.
Calculate My Paycheck →Frequently asked questions
What is gross pay?
Gross pay is the amount you earn before applicable taxes and other payroll deductions are taken out.
What is net pay?
Net pay is the amount remaining after applicable payroll taxes and other deductions have been withheld.
Is net pay the same as take-home pay?
The terms net pay and take-home pay are commonly used to describe the amount an employee receives after applicable payroll deductions.
Why is my net pay lower than my gross pay?
Payroll taxes and other deductions are generally taken from gross earnings before the remaining amount is paid to you.
Can two people with the same gross pay have different net pay?
Yes. Tax withholding, benefits, retirement contributions, state or local taxes and other deductions can differ between employees.
Is gross pay the same as taxable income?
Not necessarily. Payroll and tax rules determine which types of compensation are subject to particular taxes.
Sources & notes
General payroll definitions on this page are based on U.S. government guidance from the Internal Revenue Service.
PaycheckMint calculations are estimates. Actual withholding can vary based on your earnings, pay frequency, Form W-4 information, state and local rules, benefits and other deductions.