Gross Pay vs. Net Pay: Where Your Money Goes Between Paycheck and Bank
February 25, 2026 · Published by Soxoa
Put this guide into practice
See representative Pay Stub fields, compare the output with the source, then choose the workflow you need.
Why Your Paycheck Is Less Than Your Salary
If you earn $75,000/year, your gross pay per biweekly paycheck is $2,884.62. But your bank account probably sees $1,900–$2,200 — sometimes significantly less. The gap between gross and net isn't money disappearing; it's a precise set of deductions, each with its own purpose and rules.
Mandatory Tax Deductions
Federal Income Tax Withholding
Based on your W-4 elections and filing status. Uses IRS withholding tables applied to your taxable wages each pay period. For a single filer at $75,000, federal withholding is roughly $8,000–$10,000/year depending on W-4 adjustments — about $308–$385 per biweekly paycheck.
State Income Tax
Varies significantly by state. California (up to 12.3% + 1% mental health tax), New York (up to 10.9%) vs. zero-income-tax states like Texas, Florida, Nevada, Washington. Same $75,000 salary has a dramatically different take-home depending on where you live.
Social Security Tax (OASDI)
6.2% of gross wages up to $176,100 (2025 wage base). On a $75,000 salary: $4,650/year, or $178.85 per biweekly paycheck. Capped — once you hit the wage base mid-year, this stops being withheld.
Medicare Tax
1.45% of all wages, no cap. $75,000 salary = $1,087.50/year, or $41.83 per biweekly paycheck. An additional 0.9% applies to wages above $200,000 ($250,000 for MFJ).
Pre-Tax Benefit Deductions (Reduce Taxable Income)
These come out of your paycheck before taxes are calculated, lowering your taxable wage:
Health/Dental/Vision Insurance Premiums
Your share of employer-sponsored health insurance. Average employee contribution: $150–$400/month depending on plan and coverage tier (employee-only vs. family).
Traditional 401(k) or 403(b) Contributions
Pre-tax retirement contributions reduce Box 1 on your W-2. Contributing $500/biweekly pay period ($13,000/year) reduces your taxable income by $13,000 — saving roughly $2,860 in federal income tax at the 22% bracket.
Health Flexible Spending Account (FSA)
Pre-tax contributions for healthcare expenses. 2025 limit: $3,300. Reduces taxable income dollar-for-dollar.
Dependent Care FSA
Pre-tax contributions for childcare. Up to $5,000 per household ($2,500 if MFS). One of the most valuable pre-tax benefits for parents.
HSA Contributions (if on HDHP)
Health Savings Account contributions are triple tax-advantaged: pre-tax going in, tax-free growth, tax-free for qualified medical expenses. 2025 limit: $4,300 individual, $8,550 family.
Commuter Benefits
Pre-tax transit and parking. Up to $325/month each for transit passes and parking in 2025.
After-Tax Deductions
These come out after taxes are calculated — no tax savings, but money goes toward specific purposes:
- Roth 401(k) contributions (after-tax; tax-free in retirement)
- Life insurance above employer-provided amounts
- Garnishments (court-ordered wage deductions)
- Union dues
- Voluntary additional insurance (disability, accident, critical illness)
Reading Your Net Pay Calculation
Your pay stub shows the math: Gross Pay → minus Pre-tax deductions = Taxable wages → minus Taxes = After-tax pay → minus After-tax deductions = Net Pay.
Upload your pay stub to paystubparser.com to extract every line — gross, deductions, taxes, and net — into structured data for verification, recordkeeping, or income documentation.