On This Page
- Where your paycheck goes
- The three-step formula
- Working backward to a gross salary
- Comparing job offers on take-home pay
- Setting it up for your country
- Four mistakes that skew the answer
- How both modes are verified
- FAQ
- References
Where Your Paycheck Goes
Gross pay is what you earn. Net pay is what arrives in your account. Everything in between falls into three buckets, and the order they come out in changes the answer:
| Bucket | Examples | Effect |
|---|---|---|
| 1. Pre-tax deductions | Traditional 401(k) or pension, health insurance premiums, HSA/FSA, commuter benefits | Lower your taxable pay, so you pay less tax |
| 2. Tax | Federal or national income tax, state or provincial tax, FICA or National Insurance | Charged only on what is left after bucket 1 |
| 3. Post-tax deductions | Roth 401(k), union dues, garnishments, after-tax insurance | Cut take-home pay but not your tax |
Pick Gross to net or Net to gross, choose a pay frequency, and fill in the rates and deductions. The results show tax, other deductions, the share of gross you keep, and an annual figure whatever frequency you chose.
The Three-Step Formula
A $60,000 salary with $3,000 into a 401(k) and 24.65% combined tax (12% federal, 5% state, 7.65% FICA): $57,000 is taxable, tax is $14,050.50, and take-home is $42,949.50, 71.58% of gross.
A $2,500 biweekly check with a $140 pre-tax 401(k), 26.65% tax and a $45 post-tax loan repayment: $2,360 × 0.7335 − $45 = $1,686.06 a paycheck, $43,837.56 over 26 pay periods.
Working Backward to a Gross Salary
The usual slip is adding the tax rate to the net figure. Tax is charged on taxable pay, so you have to divide by (1 − rate) to gross it up, the same principle the Reverse Sales Tax Calculator uses on a receipt.
- $3,500 a month take-home with 17.65% tax and a $200 pre-tax premium needs $3,500 ÷ 0.8235 + $200 = $4,450.15 a month, $53,401.82 a year.
- $85,000 a year net with 35.65% tax, a $6,000 401(k) and $1,200 of union dues needs $86,200 ÷ 0.6435 + $6,000 = $139,954.93.
Pricing a freelance rate instead of a salary? The Freelance Rate Calculator grosses up a take-home target for tax and business costs. For a self-employed person weighing a salaried offer, the Net Profit Calculator uses the same before-and-after-tax framing for a business.
Comparing Job Offers on Take-Home Pay
A bigger gross salary does not always mean a bigger paycheck. A generous pre-tax 401(k) match and health plan shield more pay from tax, and a remote job in a state with no income tax drops a whole tax field to zero. Run each offer with its own rates and deductions, since comparing gross figures hides exactly those differences.
- Hourly vs salaried offers: convert first with the Hourly to Salary Calculator.
- Base plus commission: estimate total gross with the Sales Commission Calculator, then run it here. Real estate agents face the same gap between gross commission income and take-home, covered in average real estate commission rates.
- What the paycheck buys: the Savings Goal Calculator shows how fast each offer reaches a savings target, and how much Americans are saving in 2026 gives context on what is realistic.
Setting It Up for Your Country
| Country | "Federal / national" | "State / local" | "FICA / National Insurance" |
|---|---|---|---|
| US | Federal income tax | State and city tax | FICA (7.65%) |
| UK | Income Tax (effective rate) | 0 | National Insurance |
| Canada | Federal tax | Provincial tax | CPP + EI |
| Ireland | Income Tax | USC | PRSI |
| Australia | PAYG withholding | 0 | Medicare levy |
A UK example: £45,000 with a £2,000 pre-tax pension and an effective 28% (20% tax plus 8% NI) leaves £30,960, 68.8% of gross. In Australia, superannuation is usually paid on top of salary rather than deducted from it, so leave it out of the deduction fields.
Four Mistakes That Skew the Answer
- Taxing the full gross. Tax applies after pre-tax deductions.
- Swapping deduction types. A Roth and a traditional 401(k) look alike on a payslip but sit on opposite sides of the tax line.
- Entering your top marginal rate. Progressive systems tax only income above each threshold at the higher rate. An effective, average rate gives a far closer estimate.
- Comparing per-period pay across schedules. $2,500 biweekly (26 checks) and $5,000 semi-monthly (24) are different salaries, so compare the annual figure. For hourly workers, check the gross itself too: rounded time punches feed straight into it, as our 7-minute rule guide explains.
How Both Modes Are Verified
Net Pay mode subtracts pre-tax deductions from gross pay first, applies the combined federal, state, and other tax percentage to what is left, then subtracts post-tax deductions to reach net pay. The annual figure multiplies that per-period net by however many pay periods your selected frequency implies (12 for monthly, 26 for biweekly, 52 for weekly, and so on). Gross Pay mode solves the same relationship backward: it adds your post-tax deductions to net pay, divides by (1 minus the combined tax rate) to recover taxable pay, then adds back pre-tax deductions to arrive at gross.
Frequently Asked Questions
How do you calculate gross pay from net pay in Excel?
With gross pay in B2, combined tax rate in C2, pre-tax deductions in D2, and post-tax deductions in E2, use =(F2+E2)/(1-C2/100)+D2 where F2 holds your target net pay. This mirrors the calculator's Mode 2 formula exactly.
Why is my net pay lower than gross pay minus taxes alone?
Post-tax deductions, such as Roth 401(k) contributions, after-tax insurance add-ons, or wage garnishments, are subtracted after tax is calculated and are separate from the tax amount itself. If your actual take-home pay is lower than gross pay minus tax, a post-tax deduction is almost always the reason.
References
- IRS: Social Security and Medicare Withholding Rates: current FICA tax rates applied to gross pay in US payroll calculations.
- GOV.UK: Estimate Your Income Tax: official UK Income Tax band and National Insurance guidance for estimating take-home pay.
- Canada Revenue Agency: CPP Contributions: official guidance on Canada Pension Plan contribution rates deducted from gross pay.