How to Calculate Net Pay From Gross Pay: Every Step Explained (2026)
Here is how to calculate net pay from gross pay, in plain language and step by step, exactly as our Salary & Paycheck Calculator does it — including the 2026 IRS federal withholding tables, Social Security and Medicare (FICA) rates, and the order deductions come out of your paycheck.
What You Enter in the Paycheck Calculator
Before any math happens, the tool reads these values from the form: pay type (hourly or monthly salary), hourly rate with regular and overtime hours per week or monthly salary, pay frequency, federal filing status, and your Form W-4 entries — multiple jobs (Step 2), dependents amount (Step 3), other income (Step 4a), deductions (Step 4b), and extra withholding per paycheck (Step 4c). It also reads your 401(k) contribution percentage and a per-paycheck health insurance premium.
How Annual Gross Pay Is Calculated
Everything downstream is calculated from a single number: your gross pay for the full year. Hourly workers have this projected forward at 52 weeks, with overtime hours paid at 1.5× the hourly rate; salaried workers enter a monthly salary, which is multiplied by 12.
How to Calculate Gross Pay per Paycheck
The annual figure is divided by the number of pay periods in a year for the schedule you selected, and rounded to the cent.
| Schedule | Periods/yr |
|---|---|
| Weekly | 52 |
| Bi-weekly | 26 |
| Semi-monthly | 24 |
| Monthly | 12 |
| Quarterly | 4 |
| Annually | 1 |
Pre-Tax Deductions: 401(k) and Health Insurance
401(k) contributions are taken as a percentage of each paycheck's gross pay. Health insurance is a flat dollar amount per paycheck. The two are treated differently for tax purposes:
Adjusted Annual Wage for Federal Withholding
The calculator follows the IRS method for automated payroll (Publication 15-T, Worksheet 1A). Your federal tax wages are annualized, your W-4 other income is added, your W-4 deductions are subtracted, and a filing-status allowance is subtracted.
| Single | $8,600 |
| Married Filing Jointly | $12,900 |
| Head of Household | $8,600 |
Together with the 0% bracket in step 5, this allowance equals the 2026 standard deduction: $16,100 single, $32,200 married filing jointly, $24,150 head of household.
How Federal Income Tax Withholding Is Calculated (2026 Brackets)
Federal tax is not your adjusted wage times one flat rate. Each bracket's rate only applies to the slice of income that falls within it — income is taxed layer by layer from the bottom up until it reaches your adjusted annual wage.
| Up to | Rate |
|---|---|
| $7,500 | 0% |
| $19,900 | 10% |
| $57,900 | 12% |
| $113,200 | 22% |
| $209,275 | 24% |
| $263,725 | 32% |
| $648,100 | 35% |
| above | 37% |
| Up to | Rate |
|---|---|
| $19,300 | 0% |
| $44,100 | 10% |
| $120,100 | 12% |
| $230,700 | 22% |
| $422,850 | 24% |
| $531,750 | 32% |
| $788,000 | 35% |
| above | 37% |
| Up to | Rate |
|---|---|
| $15,550 | 0% |
| $33,250 | 10% |
| $83,000 | 12% |
| $121,250 | 22% |
| $217,300 | 24% |
| $271,750 | 32% |
| $656,150 | 35% |
| above | 37% |
If you answer Yes to multiple jobs (W-4 Step 2), the calculator uses the IRS's second set of 2026 tables, whose brackets are roughly half as wide, and the filing-status allowance becomes $0. This withholds more, to cover the second income.
| Up to | Rate |
|---|---|
| $8,050 | 0% |
| $14,250 | 10% |
| $33,250 | 12% |
| $60,900 | 22% |
| $108,938 | 24% |
| $136,163 | 32% |
| $328,350 | 35% |
| above | 37% |
| Up to | Rate |
|---|---|
| $16,100 | 0% |
| $28,500 | 10% |
| $66,500 | 12% |
| $121,800 | 22% |
| $217,875 | 24% |
| $272,325 | 32% |
| $400,450 | 35% |
| above | 37% |
| Up to | Rate |
|---|---|
| $12,075 | 0% |
| $20,925 | 10% |
| $45,800 | 12% |
| $64,925 | 22% |
| $112,950 | 24% |
| $140,175 | 32% |
| $332,375 | 35% |
| above | 37% |
Then the annual figure is converted back to a per-paycheck amount, and your W-4 dependents amount is spread across the year's paychecks and subtracted. Extra withholding (W-4 Step 4c) is shown on its own line in step 8.
How Medicare Tax Is Calculated (1.45% + 0.9% Additional Medicare)
Medicare is 1.45% of all FICA wages — there's no wage cap. Employers also withhold an Additional Medicare tax of 0.9% on wages above $200,000 a year.
Total Deductions and Net Take-Home Pay
Federal tax, extra withholding, Social Security, Medicare, Additional Medicare, and the 401(k) and health amounts are added up and subtracted from gross pay for that period. Each line is rounded to the cent first, so the lines always add up exactly to your net pay.
Annual Take-Home Pay Projection
Finally, the per-paycheck tax and deduction figures are multiplied back out by the pay frequency to show what you'll pay and keep over the full year.
Assumptions & Limitations
- TAX YEAR Uses the 2026 IRS federal withholding tables (Publication 15-T) and the 2026 Social Security wage base. These figures change every year and are updated manually.
- NO STATE TAX State and local income taxes are not calculated at all — only federal income tax and FICA are included.
- W-4 Follows the current (2020 and later) Form W-4. Older W-4s with withholding allowances are not supported.
- EMPLOYEE-SIDE ONLY Social Security and Medicare are shown for the employee's share only; the employer's matching contribution is not displayed.
- EVEN SPREAD Social Security and Additional Medicare are figured on annual wages and spread evenly over your paychecks. Real payroll stops Social Security once you reach the wage base and starts Additional Medicare once you pass $200,000, so high earners' individual paychecks will vary during the year.
- ROUNDING Each line is rounded to the nearest cent before net pay is calculated. Your employer's payroll system may round differently by a cent or two.
- ESTIMATE ONLY This tool does not account for self-employment tax, Roth or after-tax deductions, bonuses and other supplemental wages, or employer-specific benefit rules.
How Social Security Tax Is Calculated (6.2%)
Social Security is withheld at a flat 6.2% — but only on wages up to the 2026 annual wage base ($184,500). Earnings above that cap are not subject to Social Security tax. This calculation uses your FICA wages from step 3: health premiums are excluded, but your 401(k) contribution is not.