Understanding Your Paycheck: Gross Pay vs. Net Pay, Explained
Your offer letter shows a gross salary, but your bank account tells a different story. Here's exactly where the difference goes — federal tax, state tax, FICA, and pre-tax deductions.
A $75,000 salary sounds like a specific number, but the amount that actually lands in your bank account every payday is meaningfully lower — and it varies depending on where you live, how you're paid, and what deductions you've elected. Here's what happens between your gross salary and your net paycheck.
The Deductions, In Order
1. **Pre-tax deductions** (401(k) contributions, health insurance premiums) come out first, which lowers the income that gets taxed 2. **Federal income tax**, calculated using progressive tax brackets on your taxable income (gross pay minus pre-tax deductions and the standard deduction) 3. **State income tax**, which varies enormously — nine states charge none at all, while others charge up to 9%+ at higher income levels 4. **FICA taxes**: Social Security (6.2%, up to an annual wage base cap) and Medicare (1.45%, with no cap and an additional 0.9% surtax above certain thresholds)
Why Your 401(k) Contribution Doesn't Cost You Dollar-for-Dollar
This is one of the most misunderstood parts of a paycheck. If you contribute 6% of your salary to a traditional 401(k), your take-home pay doesn't drop by the full 6% — because that contribution also lowers your taxable income, part of the "cost" of contributing is offset by paying less in federal (and often state) tax.
Why State Matters So Much
Two people earning the identical $75,000 salary can have very different take-home pay depending on their state:
- **No state income tax** (Texas, Florida, Washington, and six others): keep more of every paycheck
- **High state income tax** (California, New York, Hawaii, among others): a meaningfully larger chunk goes to state tax
This is a critical factor to weigh when comparing job offers or relocating — a "raise" that moves you to a higher-tax state may not translate to as much extra take-home pay as it appears.
Pay Frequency Changes the Numbers Per Check, Not the Total
Whether you're paid weekly, bi-weekly, semi-monthly, or monthly, your **annual** take-home pay is the same — only the amount per paycheck changes, since it's your annual totals divided by a different number of pay periods (52, 26, 24, or 12 respectively).
Worked Example
$75,000 salary, single filer, New York, bi-weekly pay, 6% 401(k) contribution:
- Gross per paycheck: $2,884.62
- 401(k) (pre-tax): $173.08
- Federal income tax: ≈$390
- New York state tax: ≈$176
- Social Security + Medicare: ≈$220
- **Estimated net pay: ≈$1,925/paycheck (≈$50,050/year)**
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Calculate your take-home pay after federal and state taxes, Social Security, Medicare, and 401(k) contributions. Supports US and UK tax rules for 2025.