Gross vs. Net Salary: Why Your Paycheck Is Smaller Than Your Offer
October 21, 2026
Gross salary is your total pay before any deductions. Net salary, or take-home pay, is what remains after income tax, payroll taxes, and benefit contributions are withheld. The gap is often 20% to 35% of gross pay, depending on where you live and what benefits you choose, which is why comparing job offers by gross figures alone can be misleading.
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Deductions fall into three groups: taxes, benefits, and savings. Taxes include federal and state or local income tax and, in the US, Social Security and Medicare (FICA) at 7.65% combined for employees up to the Social Security wage limit. Other countries have comparable social-insurance contributions.
Benefits such as health insurance premiums and dental or vision plans are usually taken from gross pay. Savings contributions, such as a traditional 401(k), reduce taxable income, while Roth contributions do not.
- Income tax withholding (federal, state, local).
- Payroll taxes such as Social Security and Medicare.
- Health, dental, and vision premiums.
- Retirement contributions (pre-tax or Roth).
- Other items: union dues, garnishments, flexible spending accounts.
A Quick Estimating Method
For a rough estimate, subtract an effective tax rate from gross pay, not your marginal rate. A $80,000 salary with an effective total tax rate of 22% leaves $62,400 a year, or $5,200 a month, before benefits. Subtract premiums and savings contributions to estimate the real take-home figure.
Because of progressive brackets, your effective rate is always lower than your top marginal rate, so using the marginal rate understates take-home pay.
Using Net Pay to Compare Offers
Compare offers on a net basis after adjusting for state taxes, health-plan costs, and employer retirement matching. A lower salary with a full employer match and cheaper premiums can leave you with more money than a higher-salary offer with weak benefits.
Also check pay frequency. Biweekly pay produces 26 checks a year, so two months a year you receive three, which is helpful for budgeting extra expenses.
Frequently Asked Questions
What is the difference between gross and net pay?
Gross pay is the amount before deductions, and net pay is the amount you receive after taxes and other deductions are withheld.
How much of my salary goes to taxes?
It varies widely by income and location. Many full-time employees see total income and payroll taxes of roughly 20% to 30% of gross pay.
Why is my net pay lower than expected?
Common causes are higher withholding, benefit premiums, retirement contributions, and employer-specific deductions. Your pay stub itemizes each one.
Does contributing to a 401(k) reduce my take-home pay by the full amount?
No. A traditional 401(k) contribution reduces taxable income, so take-home pay falls by less than the contribution. Roth contributions reduce take-home by the full amount.