GLOSSARY · BUDGETING, SPENDING & SAVING

Take-home pay

The part of your gross pay that reaches your bank account after taxes and payroll deductions. The gap between gross and net is made up of income tax withholding, Social Security and Medicare, and deductions you chose, such as retirement contributions and health premiums. Some of those deductions are savings you still own, so net pay understates what you earn.

Also called: net pay, net income, after-tax pay, gross vs net pay

FORMULA

Net pay = gross pay − pre-tax deductions − income tax withheld − Social Security and Medicare − after-tax deductions

COMPUTE IT WITH YOUR NUMBERS

Paycheck budget →How should I split each paycheck between bills, savings and spending?Raise after tax and years-sooner-to-FI →What is a raise worth after tax over my career, and how many years sooner does it get me to FI?

LEARN IT PROPERLY

CHAPTER · ARRIVING AND WORKING ON A VISA · FOUNDATIONSYour Paycheck: Withholding and the W-4 for Nonresidents CHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSBuilding the Structure: Take-Home Pay, Order and Accounts

SOURCES

Publication 15 (Circular E), Employer's Tax Guide. Internal Revenue Service.

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