The amount you actually receive after all deductions — what hits your bank account.
Net pay, also called take-home pay, is the amount deposited into your bank account after all deductions (taxes, insurance, 401k, etc.) are subtracted from your gross pay. On average, American workers take home about 70-80% of their gross pay, depending on their tax bracket, state, and pre-tax deductions. Net pay = Gross Pay − Federal Tax − State Tax − FICA − Benefits − Other Deductions.
$2,000 Gross − $480 Taxes − $120 Benefits = $1,400 Net Pay
Net pay is the bottom-line number — the amount that actually shows up in your bank account after every deduction. On most paystubs it appears in bold at the bottom of the deductions column, often labeled "Net Pay," "Take-Home," or "Net Earnings." It's the only number that matters for budgeting day-to-day expenses.
The full deduction stack (in roughly the order they're subtracted):
1. Pre-tax deductions: 401(k) contributions, traditional IRA, HSA, FSA, pre-tax health insurance, parking/transit benefits. These reduce both gross pay AND your taxable income — a tax savings on top of the contribution. 2. Federal income tax (FIT) computed on the post-pre-tax wages. 3. FICA (Social Security 6.2% + Medicare 1.45%) computed on the GROSS wages, not post-pre-tax (Social Security still uses gross). 4. State income tax (varies by state; 9 states have none). 5. Local/city/county income tax (where applicable: NYC, Detroit, Philadelphia, KY local, OH cities, MI cities, etc.). 6. Post-tax deductions: Roth 401(k), garnishments, union dues, charity payroll deductions, life insurance over $50,000.
Real example for a $4,000 bi-weekly gross earner in California: - Gross pay: $4,000 - 401(k) contribution (10%): −$400 - Pre-tax health: −$150 - Federal income tax (~12% bracket effective): −$390 - FICA (7.65% × $4,000): −$306 - CA state tax (~6% effective): −$240 - CA SDI (1.1%): −$44 - Net pay: $2,470 (61.75% of gross)
Why your net is lower than friends in other states. State and local taxes are the biggest variable. A California earner takes home much less than a Texas or Florida earner with the same gross — sometimes $300+/month difference on a $5,000 gross paycheck.
Common mistake: Promising landlord rent based on gross pay. If your gross is $5,000 but net is $3,400, paying $1,800 rent ("only 36% of income!") leaves $1,600 for everything else — utilities, food, transport, savings. Always budget from net.
Source: IRS Publication 15-T withholding methods; Society for Human Resource Management (SHRM) payroll processing guidelines.