Gross income is the number in your offer letter; net income is the number that lands in your bank account. The gap between them is made of a few fixed tax rates and several things that depend on you, such as your Form W-4, your state and your benefits.
This guide defines both terms, lists what comes out between gross and net with the 2026 federal rates, and works through a $60,000 salary paid every two weeks. It follows IRS Publication 15 and IRS Topics 751, 753 and 424.
| Gross | Net | |
|---|---|---|
| Meaning | Everything you earn before anything is taken out | What is left after taxes and deductions: your take-home pay |
| Also called | Gross pay, gross salary, gross wages | Net pay, take-home pay |
| Which is higher? | Always higher or equal | Always lower or equal |
| Used for | Quoting a salary, loan and rental applications | Budgeting your actual spending |
Gross and net are everyday terms rather than IRS-defined terms; the IRS rules below decide what comes out between the two.
| Deduction | 2026 rule | Source |
|---|---|---|
| Social Security tax | 6.2% of wages, up to the $184,500 wage base | IRS Pub. 15 (2026) |
| Medicare tax | 1.45% of all covered wages, no wage base limit | IRS Pub. 15 (2026) |
| Additional Medicare Tax | 0.9% on wages above $200,000 in a calendar year | IRS Pub. 15 (2026) |
| Federal income tax withholding | Computed from your Form W-4 using the IRS withholding tables | IRS Topic 753; Pub. 15-T |
| State and local income tax | Varies by state and city; some states have none | State agency |
| Pre-tax benefits and retirement | 401(k) deferrals avoid income tax withholding but not Social Security and Medicare tax; HSA contributions through a section 125 cafeteria plan avoid both | IRS Topic 424; Pub. 15 |
| Other post-tax deductions | Union dues, garnishments, after-tax benefits | Employer and plan |
Employers also pay their own matching 6.2% and 1.45%, but that is not taken from your pay. Your Form W-4 tells your employer your filing status, credits, other income, deductions and any extra amount to withhold; if you do not give one, your employer must withhold as if you are single with no other entries.
Next-year note (not the 2026 rule): the Social Security Administration has announced that the maximum amount of earnings subject to Social Security tax (the wage base) will increase to $192,300 for 2027. The 2026 figure above stays $184,500.
This example computes the legally fixed parts and labels the rest as assumptions. Gross pay per paycheck is $60,000 / 26 = $2,307.69.
| Line | Amount | How it is figured |
|---|---|---|
| Gross pay | $2,307.69 | $60,000 / 26 pay periods |
| Social Security tax | -$143.08 | 6.2% x $2,307.69 |
| Medicare tax | -$33.46 | 1.45% x $2,307.69 |
| Federal income tax withholding | -$200.00 | Assumed for this example; your actual amount depends on your Form W-4 |
| State income tax | $0.00 | Assumed: a state with no income tax |
| Net pay | $1,931.15 | Gross minus the lines above |
Total FICA is $176.54, which is 7.65% of gross. Because the federal withholding and state lines are assumptions, your own net pay will differ; the check stub breakdown is explained in our pay stub guide.
On a tax return, taxable wages are not the same as your gross pay if you contribute to a 401(k): elective deferrals are not included in box 1 wages on your Form W-2, but they are included as wages subject to withholding for Social Security and Medicare taxes. See our 401(k) limits guide and Additional Medicare Tax guide.
IRS Publication 15 (2026), IRS Topic no. 751, Social Security and Medicare withholding rates, IRS Topic no. 753, Form W-4, IRS Topic no. 424, 401(k) plans.