Salary & Income
Net vs Gross Income: What's the Real Difference?
Net vs gross income is the gap between what you earn and what actually lands in your bank account. Gross income is your pay before anything is taken out; net income is what is left after taxes and deductions. Knowing both helps you apply for loans, compare job offers and build a realistic budget. Check your own numbers in the [Take-Home Pay Calculator](/calculators/take-home-pay-calculator).
By the MoneyTools Editorial TeamLast updated 6 min readEditorial Policy
What gross income means
Gross income is everything you earn before any money is withheld. For a salaried worker it is the yearly salary on the offer letter. For hourly workers it is hours times rate, plus overtime, bonuses and tips. Gross income is the starting point for taxes and the number most forms ask for.
What net income (take-home pay) means
Net income is your pay after federal and state income tax, Social Security and Medicare (FICA), and payroll deductions such as 401(k) contributions and health insurance. It is the amount you can actually spend or save each month.
Net vs gross income example: $75,000 salary
Worked example
From gross to net
- Gross salary: $75,000
- 401(k) at 6%: $4,500 (pre-tax)
- Federal income tax (single, 2025 standard deduction $15,750): ≈ $6,959
- FICA (7.65% of $75,000): $5,737.50
- State income tax (example 4% of $70,500): $2,820
- Net pay: $75,000 − $4,500 − $6,959 − $5,737.50 − $2,820 ≈ $54,984 a year
About $54,984 a year, or roughly $4,582 a month.
| Item | Yearly | Monthly |
|---|---|---|
| Gross salary | $75,000 | $6,250 |
| Federal income tax | −$6,959 | −$580 |
| FICA | −$5,738 | −$478 |
| State tax (example 4%) | −$2,820 | −$235 |
| 401(k) (6%) | −$4,500 | −$375 |
| Net (take-home) | $54,984 | $4,582 |
The 401(k) money is still yours — it is saved for retirement, not lost. It just is not in your paycheck.
Why lenders ask for gross income but you budget with net
Lenders use gross income because it is consistent and easy to verify, and rules such as debt-to-income ratios are built around it. But you can only spend net income. A rent or car payment that looks fine against $6,250 gross may feel tight against $4,582 net. Build your budget on net pay — the Budget Calculator can help.
Calculate your take-home pay
Enter your salary, filing status and deductions in the Take-Home Pay Calculator to see your own net vs gross income. For hourly pay, start with the Hourly to Salary Calculator.
Run your own numbers
Estimate your paycheck after taxes and deductions using your own rate assumptions.
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