The Gross-to-Net Formula: All Steps
- Step 1: Gross Pay = Annual Salary ÷ Pay Periods (26 for biweekly, 24 for semimonthly, 12 for monthly)
- Step 2: Subtract Pre-Tax Deductions: 401k, Traditional IRA (if payroll), HSA, FSA, health/dental/vision premium
- Step 3: Calculate Federal Income Tax on (Gross - Pre-Tax Deductions), applying withholding tables
- Step 4: Calculate FICA: Social Security (6.2% on first $168,600) + Medicare (1.45% on all wages) = 7.65%
- Step 5: Calculate State Income Tax (0–13.3% depending on state, applied to taxable wages)
- Step 6: Subtract post-tax deductions (Roth contributions, life insurance, union dues, garnishments if any)
- Step 7: Net Pay = Gross - All Deductions and Taxes
📊Complete Worked Example: $85,000 Annual Salary, Single, CA
Biweekly gross: $85,000 ÷ 26 = $3,269. Pre-tax deductions: 401k ($452) + HSA ($166) = $618. Taxable wages: $3,269 - $618 = $2,651. Federal tax (2025 tables): $285. FICA: $250. CA state tax (at $2,651/period): $142. Net take-home: $3,269 - $618 - $285 - $250 - $142 = $1,974/biweekly ($4,277/month).
How Different Deductions Affect Take-Home
Impact of pre-tax vs. post-tax deductions on take-home pay
| Deduction Added | Pre-Tax? | Take-Home Reduction | Real Cost (22% bracket) |
|---|---|---|---|
| $500/month 401k | Yes | $390/month less take-home | You invest $500, costs you $390 |
| $100/month HSA | Yes | $78/month less take-home | You invest $100, costs you $78 |
| $200/month health insurance | Yes (employer plan) | $156/month less take-home | Premium of $200 costs $156 |
| $500/month Roth 401k | No | $500/month less take-home | No immediate tax savings |
| $200/month charitable | No (unless itemizing) | $200/month less take-home | No paycheck tax benefit |
Calculate Your Exact Take-Home Pay
Enter your gross salary and all deductions — see step-by-step how your net pay is calculated.