Gross Pay vs. Net Pay: Where Your Paycheck Goes
You took a job at $20 an hour. Forty hours a week, so $800. Then the first paycheck shows up and it's noticeably less. Nothing went wrong: that's the difference between gross pay and net pay.
Gross pay: what you earned
Gross pay is your pay before anything comes out. Hours times rate, plus overtime, bonuses and anything else your employer pays you.
Net pay: what you keep
Net pay is gross pay minus:
- Taxes: federal income tax, Social Security, Medicare, and possibly state and local income tax.
- Deductions: insurance premiums, retirement contributions and anything else you've signed up for.
A rough example
Here's a simplified week for someone earning $800 gross. Your numbers will differ with your state, your W-4 and your benefits.
| Amount | |
|---|---|
| Gross pay | $800.00 |
| Social Security (6.2%) | −$49.60 |
| Medicare (1.45%) | −$11.60 |
| Federal income tax | depends on your W-4 |
| State income tax | depends on your state |
| Health insurance | depends on your plan |
| Net pay | often 70–85% of gross |
Social Security and Medicare are the only fixed percentages for most people: 7.65% together. Everything else depends on you.
Why it matters for your budget
Budgeting with gross pay is one of the most common money mistakes. If you plan around $800 a week and $650 arrives, you're short $150 every week before you've spent anything.
Always budget with net pay, and use your actual pay stub, not an estimate from a job offer.
When net pay changes
Your net pay can change even if your hours don't:
- Overtime raises gross pay, and taxes too.
- Benefit changes at open enrollment change your deductions.
- A new W-4 changes your federal withholding.
- January: new tax tables, new benefit costs and reset yearly limits can all change your first paycheck of the year.
- High earners: Social Security stops after $184,500 of wages in 2026, so late-year paychecks can get bigger.
Hourly pay makes it harder
If your hours change week to week, so does your net pay, and not in a straight line. A long week doesn't just add hours; it can add overtime at 1.5 times your rate and more withholding.
That's why IncomeSync projects each paycheck separately, with your actual hours, overtime and deductions, instead of assuming every check is the same. You see the net amount you'll actually get, before payday.